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, 20X1	800	1,300
Second quarter, 20X1	2,200	1,400
Third quarter, 20X1	5,600	5,300
Fourth quarter, 20X1	4,600	3,900
First quarter, 20X2	900	1,200

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 20X1 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 20X1 and for the year in total. Enter amounts as positive numbers.

Stillwater Designs Production Budget for S12L7 For the Year Ended December 31, 20X1

	1st qtr	2nd qtr	3rd qtr	4th qtr	year
sales
Desired ending inventory
Total needs
Less: Beginning inventory
Units produced

Stillwater Designs Production Budget for S12L5 For the Year Ended December 31, 20X1

	1st qtr	2nd qtr	3rd qtr	4th qtr	year
sales
Desired ending inventory
Total needs
Less: Beginning inventory
Units produced

Answer 1

Ans.	Production Budget for S12L7
		Q1	Q2	Q3	Q4	Year
	Sales	800	2200	5600	4600	13200
	Desired ending inventory	440	1120	920	180	2660
	Total needs	1240	3320	6520	4780	15860
	Less: Beginning Inventory	-340	-440	-1120	-920	-2820
	Units produced	900	2880	5400	3860	13040
	*Desired ending inventory = 20% of next quarter's sales
	eg.   Ending inventory of Q1 =   Sales of Q2 * 20%
	Production Budget for S12L5
		Q1	Q2	Q3	Q4	Year
	Sales	1300	1400	5300	3900	11900
	Desired ending inventory	420	1590	1170	360	3540
	Total needs	1720	2990	6470	4260	15440
	Less: Beginning Inventory	-170	-420	-1590	-1170	-3350
	Units produced	1550	2570	4880	3090	12090
	*Desired ending inventory = 30% of next quarter's sales
	eg.   Ending inventory of Q1 =   Sales of Q2 * 30%
	*Beginning inventory = Ending inventory of pervious quarter
	eg.    Beginning inventory of Q2 = Ending inventory of Q1