Question

In: Accounting

luebear Company produces two products: dirt bikes and four wheelers. The dirt bike sells for $8,000,...

luebear Company produces two products: dirt bikes and four wheelers. The dirt bike sells for $8,000, and the four wheeler sells for $10,000. Projected sales of the two products for the coming four quarters are given below.

Dirt Bikes Four Wheelers First Quarter 10,000 15,000 Second Quarter 12,000 17,000 Third Quarter 13,000 18,000 Fourth Quarter 8,000 14,000

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 4,200 dirt bikes and 5,300 four wheelers were in inventory on January 1. Company policy dictates that ending inventory should equal 15 percent of the next quarter’s sales for dirt bikes and 20 percent of next quarter’s sales for four wheelers.

Required: a. Prepare a sales budget for each quarter and for the year in total. Show sales by product and in total for each time period. (5 points) b. Prepare a separate production budget for each product for each of the first three quarters of the year. (5 points

Solutions

Expert Solution

Solution:

Part 1 – Sales Budget

Sales Budget

Quarter 1

Quarter 2

Quarter 3

Quarter 4

Year Total

Dirk Bike

Expected Unit Sales

10,000

12,000

13,000

8,000

43,000

Unit Selling Price

$8,000

$8,000

$8,000

$8,000

$8,000

Budgeted Sales in dollars (A)

$80,000,000

$96,000,000

$104,000,000

$64,000,000

$344,000,000

Four Wheeler

Expected Unit Sales

15,000

17,000

18,000

14,000

64,000

Unit Selling Price

$10,000

$10,000

$10,000

$10,000

$10,000

Budgeted Sales in dollars (B)

$150,000,000

$170,000,000

$180,000,000

$140,000,000

$640,000,000

Total Budgeted Sales (A + B)

$984,000,000

Part 2 – Production Budget for first 3 quarter

Production Budget in units

Dirt Bike

Quarter 1

Quarter 2

Quarter 3

Next Month's Expected Unit Sales

12000

13000

8000

Ratio of inventory to future sales

15%

15%

15%

Budgeted Finished Goods Ending Inventory (units)

1800

1950

1200

Add: Budgeted Sales (units)

10000

12000

13000

Required units of available production

11800

13950

14200

Total Needs

21800

25950

27200

Less: Budgeted Beginning Inventory (Ending Finished Goods Inventory of last month)

4200

1800

1950

Units to be produced

17600

24150

25250

Production Budget in units

Four Wheeler

Quarter 1

Quarter 2

Quarter 3

Next Month's Expected Unit Sales

17000

18000

14000

Ratio of inventory to future sales

20%

20%

20%

Budgeted Finished Goods Ending Inventory (units)

3400

3600

2800

Add: Budgeted Sales (units)

15000

17000

18000

Required units of available production

18400

20600

20800

Total Needs

33400

37600

38800

Less: Budgeted Beginning Inventory (Ending Finished Goods Inventory of last month)

5300

3400

3600

Units to be produced

28100

34200

35200

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you


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