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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 106,800 units. The following unit sales of the transmissions are expected during the rest of the year: second quarter, 267,000 units; third quarter, 476,000 units; and fourth quarter, 404,500 units. Company policy calls for the ending finished goods inventory of a quarter to equal 40% 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

Answer:

ELECTRO COMPANY

Production Budget

Second and Third Quarters

Second Quarter

Third Quarter

Budgeted ending inventory (units)

(476000units * 40%)

                190400

(404500units * 40%)

            161800

Budgeted unit sales for the quarter

                267000

            476000

Required units of available production

                457400

            637800

Budgeted beginning inventory (units)

               -106800

          -190400

Units to be produced

                350600

            447400

ekkarill92 answered 2 years ago
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