Schwartz and Company expects to sell 100 units in the first quarter and 90 units in the second quarter. Assuming the company prefers to maintain finished goods inventory equal to 10 percent of the next quarter’s sales, prepare a production budget for the first quarter using Exhibit 9.2 as a guide.

Exhibit 9.2

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Production Budget for Jerry's Ice Cream Jerry's Ice Cream Production Budget Year Ending December 31 Quarter 1 2 3 4 Year Sales in units (Exhibit 9.1) 40,000 48,000 60,000 52,000 200,000 Add desired ending finished goods inventory* 4,800 6,000 5,200 4,400 4,400 Total finished goods inventory needed Deduct beginning finished goods inventory** 44,800 54,000 65,200 56,400 204,400 (4,000) (4,800) (6,000) (5,200) (4,000) Units to be produced 40,800 49,200 59,200 51,200 200,400 *Desired ending inventory = 10% X next quarter sales; for the first quarter, 4,800 = 0.10 x 48,000. Fourth quarter desired ending inventory of 4,400 units is based on an estimate of sales in the first quarter of next year. **Beginning inventory = inventory at end of previous quarter; for example, second quarter beginning inventory = first quarter ending inventory.