Question

Question 1. James Company is preparing budgets for the Third quarter of 2019. All relevant information is presented below.

A. James Company expects sales as shown below:

	Budgeted Sales (Units)
July	25,000
August	28,000
September	36,000
October	42,000
November	50,000
December	58,000

The sales price is $32 per unit. The desired ending inventory of units is 15% higher than the beginning inventory of 1,000 units.

1. Prepare a sales budget for the third quarter, in total, October by month.

	2019
	July	August	September	Q3 Total	October
Budgeted sales in units	25,000	28,000	36,000		42,000
Sales Price Per Unit
Total Budget Sales

B. James Company is preparing a production budget for the third quarter. Ending inventory level must equal 15% of the next month’s sales.

2. Prepare a production budget for the third quarter, in total, October and November by month.

	2019
	July	August	September	Q3 Total	October	November
Next Month Budget Sale
Ratio of Inventory
Desired Units in Ending inventory
Plus: Budgeted sales in units
Total Units Needed
Less: Units in Beginning Inventory
Budgeted units to be Produced

Answer 1

1		July	August	September	Q3 Total	October
	Budgeted sales in units	25,000	28,000	36,000	89,000	42,000
	Sales Price Per Unit	$32	$32	$32	$32	$32
	Total Budget Sales	$800,000	$896,000	$1,152,000	$2,848,000	$1,344,000
2		July	August	September	Q3 Total	October	November
	Next Month Budget Sale	28,000	36,000	42,000		50,000	58,000
	Ratio of Inventory	15%	15%	15%		15%	15%
	Desired Units in Ending inventory	4,200	5,400	6,300	6,300	7,500	8,700
	Plus: Budgeted sales in units	25,000	28,000	36,000	89,000	42,000	50,000
	Total Units Needed	29,200	33,400	42,300	95,300	49,500	58,700
	Less: Units in Beginning Inventory	3,750	4,200	5,400	3,750	6,300	7,500
	Budgeted units to be Produced	25,450	29,200	36,900	91,550	43,200	51,200