Shocker Company's sales budget shows quarterly sales for the next year as follows:$\begin{array}{lrr}
&\text { Unit sales }\
\text { Quarter 1 } &\text { 10,000 unit } \
\text { Quarter 1 } &\text { 8,000 unit } \
\text { Quarter 1 } &\text { 12,000 unit } \
\text { Quarter 1 } &\text { 14,000 unit } \
\end{array}$

Company policy is to have a finished goods inventory at the end of each quarter equal to 20% of the next quarter's sales. Budgeted production for the second quarter of the next year would be

Question

Shocker Company's sales budget shows quarterly sales for the next year as follows:$\begin{array}{lrr}
&\text { Unit sales }\
  \text { Quarter 1 } &\text { 10,000 unit } \
 \text {  Quarter 1  } &\text { 8,000 unit } \
 \text {   Quarter 1 } &\text { 12,000 unit } \
 \text { Quarter 1   } &\text { 14,000 unit } \
\end{array}$

Company policy is to have a finished goods inventory at the end of each quarter equal to 20% of the next quarter's sales. Budgeted production for the second quarter of the next year would be

Quizplus · Accepted Answer

To calculate the budgeted production for the second quarter, we need to consider the sales forecast for the second quarter, the desired ending inventory for the second quarter (which is 20% of the third quarter's sales), and the beginning inventory for the second quarter (which is 20% of the second quarter's sales).1. Sales forecast for the second quarter: 8,000 units (as given).2. Desired ending inventory for the second quarter: 20% of the third quarter's sales = 20% of 12,000 units = 2,400 units.3. Beginning inventory for the second quarter: 20% of the second quarter's sales = 20% of 8,000 units = 1,600 units.Budgeted production for the second quarter = Sales forecast for the second quarter + Desired ending inventory for the second quarter - Beginning inventory for the second quarter = 8,000 units + 2,400 units - 1,600 units = 8,800 units.

Shocker Company's Sales Budget Shows Quarterly Sales for the Next