Superior Industries' sales budget shows quarterly sales for the next year as follows:
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 should be:

Question

Superior Industries' sales budget shows quarterly sales for the next year as follows: 
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 should be:

Quizplus · Accepted Answer

The finished goods inventory at the end of each quarter is equal to 20% of the next quarter's sales. So, we first need to calculate the sales forecast for the second quarter, which is 35,000 units (20,000 units in Q1 + 1.20 * 25,000 units in Q2).

Then, we need to calculate the required finished goods inventory for the end of Q2, which is 7,000 units (20% of 35,000 units).

To meet the required finished goods inventory, the company needs to produce 8,800 units (35,000 units - 7,000 units) during the second quarter. Therefore, the correct answer is C) 8,800 units.

Superior Industries' Sales Budget Shows Quarterly Sales for the Next