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In: Accounting

Electro Company manufactures an innovative automobile transmission for electric cars. Management predicts that ending finished goods...

Electro Company manufactures an innovative automobile transmission for electric cars. Management predicts that ending finished goods inventory for the first quarter will be 275,400 units. The following unit sales of the transmissions are expected during the rest of the year: second quarter, 459,000 units; third quarter, 493,000 units; and fourth quarter, 208,500 units. Company policy calls for the ending finished goods inventory of a quarter to equal 60% of the next quarter's budgeted sales.

Prepare a production budget for both the second and third quarters that shows the number of transmissions to manufacture.

Solutions

Expert Solution

  • Requirement

Production Budget

Second Quarter

Third Quarter

Budgeted Sales

                 459,000

                493,000

Add: Desired ending inventory

                 295,800 [493000 x 60%]

                125,100 [208500 x 60%]

Total needs

                 754,800

                618,100

Less: Beginning Inventory

                 275,400 [given]

                295,800 [ending for second quarter]

Units to be produced

                 479,400

                322,300

ekkarill92 answered 7 months ago
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