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Electro Company manufactures transmissions for electric cars. Management reports ending finished goods inventory for the first quarter at 76,400 units. The following unit sales are
Electro Company manufactures transmissions for electric cars. Management reports ending finished goods inventory for the first quarter at 76,400 units. The following unit sales are budgeted during the rest of the year: second quarter, 382,000 units; third quarter. 310,000 units; and fourth quarter, 353,500 units. Company policy calls for the ending finished goods inventory of a quarter to equal 20% of the next quarter's budgeted unit sales. Prepare a production budget for both the second and third quarters that shows the number of transmissions to manufacture. ELECTRO COMPANY Production Budget Second Quarter Third Quarter Budgeted sales units Add: Desired ending inventory Next period budgeted sales units Ratio of inventory to future sales. Desired ending inventory units: Total required units Less: Beginning inventory units Units to produce 382,000 310,000 20% 20% 76,400
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