Question

Chorus, Inc. expects quarterly sales volume for 2017 as follows: 1) 40,000 units; 2) 60,000; 3) 100,000; and 4) 50,000. Additionally, Chorus expects quarterly sales volume for 2018 as follows: 1) 70,000 units; 2) 80,000; 3) 75,000; and 4) 85,000. Chorus has an inventory policy which requires ending finished goods inventory to be 30% of budgeted sales for the next quarter.

(T or F) The amount of production necessary to meet the expected sales for 2017 is 275,000 units.

Answer 1

Ans.	FALSE
	The amount of production necessary to meet the sales for 2017 is 259,000.
	*Calculations are as follows :
	CHORUS INC.
	Production Budget
	For the Year Ended December 31, 2017
		First quarter	Second quarter	Third quarter	Fourth quarter	Total
	Sales	40,000	60,000	100,000	50,000
	Add: Desired Ending inventory	18000	30000	15000	21000
	Total needs	58,000	90,000	115,000	71,000
	Less: Beginning inventory	-12000	-18000	-30000	-15000
	Units to be produced	46,000	72,000	85,000	56,000	259,000
*WORKING NOTES :
*Ending inventory of currrent quarter = 30% of next quarter's sales
*Calculations for Ending inventory:
Quarter
1	60,000 * 30%	18000
2	100,000 * 30%	30000
3	50,000 * 30%	15000
4	70,000 * 30%	21000
Quarter 1 beginning inventory = Ending inventory of quarter 4 of 2016 = 30% of first quarter of 2017 sales
	40,000 * 30%
	12,000 units
	*Calculations for Beginning inventory:
Quarter
1	(calculated as above)	12000
2	Ending inventory of Q1	18000
3	Ending inventory of Q2	30000
4	Ending inventory of Q3	15000