Sales and Production Budgets

Berring Company produces two products: the deluxe and the standard. The deluxe sells for $40, and the standard sells for $10. Projected sales of the two models for the coming four quarters are given below.

	Deluxe	Standard
First quarter	11,000	90,000
Second quarter	14,200	88,600
Third quarter	16,500	93,000
Fourth quarter	20,000	91,800

The president of the company believes that the projected sales are realistic and can be achieved by the company. In the factory, the production supervisor has received the projected sales figures and gathered information needed to compile production budgets. He found that 1,300 deluxes and 1,170 standards were in inventory on January 1. Company policy dictates that ending inventory should equal 20 percent of the next quarters sales for deluxes and 10 percent of next quarters sales for standards.

Required:

1. Prepare a sales budget for each quarter and for the year in total. Show sales by product and in total for each time period.

Berring Company
Sales Budget
For the Year Ended December 31
	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year
Deluxe:
Units
Unit price	$	$	$	$	$
Sales	$	$	$	$	$
Standard:
Units
Unit price	$	$	$	$	$
Sales	$	$	$	$	$
Total Sales	$	$	$	$	$

Feedback

See Cornerstone 8.1.

2. Prepare a separate production budget for each product for each of the first three quarters of the year.

Production budget for deluxes:

Berring Company
Production Budget for Deluxes
First Three Quarters of the Year
	Quarter 1	Quarter 2	Quarter 3
Unit sales
Desired ending inventory
Total needed
Less: Beginning inventory
Units produced

Feedback

Units to be produced are calculated by considering beginning and ending (desired) inventory amounts and unit sales.

Production budget for standards:

Berring Company
Production Budget for Standards
First Three Quarters of the Year
	Quarter 1	Quarter 2	Quarter 3
Unit sales
Desired ending inventory
Total needed
Less: Beginning inventory
Units produced