Wise Company estimates the following unit sales. 1st quarter - 20,000 units 2nd quarter - 26,000 units 3rd quarter - 30,000 units 4th quarter - 33,000 units Management desires to have an ending Finished Goods Inventory equal to 20% of the next quarter's expected sales. What is the budgeted production in units for the 2nd quarter?

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11 February, 23:29

Wise Company estimates the following unit sales. 1st quarter - 20,000 units 2nd quarter - 26,000 units 3rd quarter - 30,000 units 4th quarter - 33,000 units Management desires to have an ending Finished Goods Inventory equal to 20% of the next quarter's expected sales. What is the budgeted production in units for the 2nd quarter?

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Cadence · Answer 1

Since 20% of the goods of the next quarter need to be produced beforehand in the second quarters start there will already be a starting inventory of (0.2*26,000) = 5,200

This means that in the second quarter to meet the the sales (26,000-5,200) = 20,800 need to be produced

Also 20% of next quarters unit sales also needs to be produced in the second quarter so (0.2*30,000) = 6000

Budgeted production in the 2nd quarter = 20,800+6,000=34,000