Coliseum Company has budgeted the following unit sales: Quarter Units Qtr. 1, 2020 60,000 Qtr. 2,...

Coliseum Company has budgeted the following unit sales:

Quarter Units

Qtr. 1, 2020 60,000

Qtr. 2, 2020 50,000

Qtr. 3, 2020 40,000

Qtr. 4, 2020 80,000

The finished goods inventory on hand on December 31, 2019 was 6,000 units. 90% of the next quarter’s sales will come from production during that quarter, and the remainder of next quarter’s sales will come from this quarter’s ending inventory.

Required: Prepare a production budget for the first two quarters of 2020. Include totals column.

Expert Solution


Ans.	COLISEUM COMPANY
	Production Budget
	For Quarter 1 & Quarter 2
	Particulars	Quarter 1	Quarter 2	Total
	Expected units to be sold	60,000	50,000	110,000
	Add: Desired ending inventory units	5000	4000	9,000
	Total required units	65000	54000	119,000
	Less: Beginning inventory units	-6000	-5000	-11,000
	Units to be produced	59000	49000	108,000

	90% of next quarter's sales will come from production it means that the 10% (i.e. 100% - 90%)of next quarter's
	sales will be ending inventory for current quarter.

*Calculations for Ending inventory :

Quarter 1	50,000 * 10%	5000
Quarter 2	40,000 * 10%	4000

*Calculations for Beginning inventory :

Quarter 1	Ending inventory of December	6000
Quarter 2	Ending inventory of Quarter 1	5000

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