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	88,200
Third quarter	16,500	92,000
Fourth quarter	20,000	91,800

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

Solution

Berring Company
Sales Budget
For the Year Ended December 31
	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year
Deluxe:
Units	11000	14500	16500	20000	62000
Unit price	$           40.00	$           40.00	$           40.00	$           40.00	$          160.00
Sales	$   440,000.00	$   580,000.00	$   660,000.00	$   800,000.00	$ 2,480,000.00
Standard:
Units	90000	88200	92000	91800	362000
Unit price	$           10.00	$           10.00	$           10.00	$           10.00	$           40.00
Sales	$   900,000.00	$   882,000.00	$   920,000.00	$   918,000.00	$ 3,620,000.00
Total Sales	$1,340,000.00	$1,462,000.00	$1,580,000.00	$1,718,000.00	$ 6,100,000.00

.

Berring Company
Production Budget for Deluxes
First Three Quarters of the Year
	Quarter 1	Quarter 2	Quarter 3
Unit sales	11000	14500	16500
Add: Desired Ending Inventory	2900	3300	4000
Total needed	13900	17800	20500
Less: Beginning inventory	1300	2900	3300
Units produced	12600	14900	17200

.

Berring Company
Production Budget for Standards
First Three Quarters of the Year
	Quarter 1	Quarter 2	Quarter 3
Unit sales	90000	88200	92000
Add: Desired Ending Inventory	8820	9200	9180
Total needed	98820	97400	101180
Less: Beginning inventory	1170	8820	9200
Units produced	97650	88580	91980