Question

Production Budget

Assume that Stillwater Designs produces two automotive subwoofers: S12L7 and S12L5. The S12L7 sells for $475, and the S12L5 sells for $300. Projected sales (number of speakers) for the coming five quarters are as follows:

	S12L7		S12L5
First quarter, 20Y1	960		1,560
Second quarter, 20Y1	2,640		1,680
Third quarter, 20Y1	6,720		6,360
Fourth quarter, 20Y1	5,520		4,680
First quarter, 20Y2	1,080		1,440

The vice president of sales believes that the projected sales are realistic and can be achieved by the company.

Stillwater Designs needs a production budget for each product (representing the amount that must be outsourced to manufacturers located in Asia). Beginning inventory of S12L7 for the first quarter of 20Y1 was 340 boxes. The company's policy is to have 20% of the next quarter's sales of S12L7 in ending inventory. Beginning inventory of S12L5 was 170 boxes. The company's policy is to have 30% of the next quarter's sales of S12L5 in ending inventory.

Required:

Prepare a production budget for each quarter for 20Y1 and for the year in total.

Stillwater Designs
Production Budget for S12L7
For the Year Ended December 31, 20Y1
	1st Qtr.	2nd Qtr.	3rd Qtr.	4th Qtr.	Year
Sales
Desired ending inventory
Total needs
Less: Beginning inventory
Units produced

Prepare a production budget for each quarter for 20Y1 and for the year in total. If required, round your answers to nearest whole value.

Stillwater Designs
Production Budget for S12L5
For the Year Ended December 31, 20Y1
	1st Qtr.	2nd Qtr.	3rd Qtr.	4th Qtr.	Year
Sales
Desired ending inventory
Total needs
Less: Beginning inventory
Units produced

Answer 1

Ans. 1	Stillwater Designs
	Production Budget for S12L7
	For the Year Ended December 31, 20X1
		First quarter	Second quarter	Third quarter	Fourth quarter	Total
	Sales	960	2,640	6,720	5,520
	Add: Desired Ending inventory	528	1344	1104	216
	Total needs	1,488	3,984	7,824	5,736
	Less: Beginning inventory	-340	-528	-1344	-1104
	Units produced	1,148	3,456	6,480	4,632	15,716
	*Ending inventory of fourth quarter = 20% of first quarter's sales of 20X2.
*Calculations for Ending inventory:				*Calculations for Beginning inventory:
Quarter				Quarter
1	2,640 * 20%	528		1	(given)	340
2	6,720 * 20%	1344		2	Ending inventory of Q1	528
3	5,520 * 20%	1104		3	Ending inventory of Q2	1344
4	1,080 * 20%	216		4	Ending inventory of Q3	1104
Ans. 2	Stillwater Designs
	Production Budget for S12L5
	For the Year Ended December 31, 20X1
		First quarter	Second quarter	Third quarter	Fourth quarter	Total
	Sales	1,560	1,680	6,360	4,680
	Add: Desired Ending inventory	504	1908	1404	432
	Total needs	2,064	3,588	7,764	5,112
	Less: Beginning inventory	-170	-504	-1908	-1404
	Units produced	1,894	3,084	5,856	3,708	14,542
	*Ending inventory of fourth quarter = 30% of first quarter's sales of 20X2.
*Calculations for Ending inventory:				*Calculations for Beginning inventory:
Quarter				Quarter
1	1,680 * 30%	504		1	(given)	170
2	6,360 * 30%	1908		2	Ending inventory of Q1	504
3	4,680 * 30%	1404		3	Ending inventory of Q2	1908
4	1,440 * 30%	432		4	Ending inventory of Q3	1404