Question

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	14,500	88,600
Third quarter	16,800	93,000
Fourth quarter	20,000	91,400

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 quarter’s sales for deluxes and 10 percent of next quarter’s 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	$	$	$	$	$

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
Total needed
Units produced

Production budget for standards:

Berring Company
Production Budget for Standards
First Three Quarters of the Year
	Quarter 1	Quarter 2	Quarter 3
Unit sales
Total needed
Units produced

Answer 1

Sales budget
	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year
Deluxe:
Units	11000	14500	16800	20000	62300
Unit price	40	40	40	40	40
Sales	440000	580000	672000	800000	2492000
Standard:
Units	90000	88600	93000	91400	363000
Unit price	10	10	10	10	10
Sales	900000	886000	930000	914000	3630000
Total Sales	1340000	1466000	1602000	1714000	6122000
Berring Company
Production Budget for Deluxes
First Three Quarters of the Year
	Quarter 1	Quarter 2	Quarter 3
Unit sales	11000	14500	16800
Add: Closing Stock	2900	3360	4000
Total needed	13900	17860	20800
Less: Opening Stock	1300	2900	3360
Units produced	12600	14960	17440
Berring Company
Production Budget for standard
First Three Quarters of the Year
	Quarter 1	Quarter 2	Quarter 3
Unit sales	90000	88600	93000
Add: Closing Stock	17720	18600	18280
Total needed	107720	107200	111280
Less: Opening Stock	1170	17720	18600
Units produced	106550	89480	92680