Nafari Company's sales budget has the following unit sales projection for each quarter of the calendar year 2011.
January -March
1,080,000
April-June
1,360,000
July-September
980,000
October-December
1,100,000
Total
4,520,000
Sales for the first quarter of 2012 are expected to be 1,200,000 units. Ending Inventory of finished goods for each quarter is scheduled to equal 10 percent of next quarter's budgeted sales. The company's ending inventory on December 31, 2010, is estimated at 94,500 units. Develop a quarterly production budget for 2011 and for the year in total.
Assignment Checklist:
Prepare the beginning inventory for the first quarter
Prepare the budgeted beginning inventory for the second - fourth quarters
Prepare the budgeted production for each quarter
Prepare the budgeted production for the year
Can some one help guide us on this
Please see your next post, which I saw first.
Sra
Sure! I can help guide you through the steps to prepare the quarterly production budget for Nafari Company in 2011.
Step 1: Prepare the beginning inventory for the first quarter.
The beginning inventory for the first quarter is the ending inventory of the previous year. It is estimated to be 94,500 units.
Step 2: Prepare the budgeted beginning inventory for the second - fourth quarters.
To calculate the budgeted beginning inventory for each quarter, you need to multiply the budgeted sales for the next quarter by 10% and add it to the ending inventory of the previous quarter.
For the second quarter (April-June):
Budgeted beginning inventory = (1,080,000 x 0.10) + 94,500 = 202,500
For the third quarter (July-September):
Budgeted beginning inventory = (1,360,000 x 0.10) + 202,500 = 338,500
For the fourth quarter (October-December):
Budgeted beginning inventory = (980,000 x 0.10) + 338,500 = 432,500
Step 3: Prepare the budgeted production for each quarter.
To calculate the budgeted production for each quarter, you need to subtract the budgeted beginning inventory from the total units needed (budgeted sales plus ending inventory).
For the first quarter (January-March):
Budgeted production = 1,080,000 + 1,200,000 - 94,500 = 2,185,500
For the second quarter (April-June):
Budgeted production = 1,360,000 + 1,200,000 - 202,500 = 2,357,500
For the third quarter (July-September):
Budgeted production = 980,000 + 1,200,000 - 338,500 = 1,841,500
For the fourth quarter (October-December):
Budgeted production = 1,100,000 + 1,200,000 - 432,500 = 1,867,500
Step 4: Prepare the budgeted production for the year in total.
To calculate the budgeted production for the year in total, you need to sum up the budgeted production for each quarter.
Budgeted production for the year = 2,185,500 + 2,357,500 + 1,841,500 + 1,867,500 = 8,252,000 units
Therefore, the quarterly production budget for Nafari Company in 2011 is as follows:
Q1 (January-March): 2,185,500 units
Q2 (April-June): 2,357,500 units
Q3 (July-September): 1,841,500 units
Q4 (October-December): 1,867,500 units
The total budgeted production for the year is 8,252,000 units.
To develop a quarterly production budget for 2011 and the total year, you will need to follow these steps:
1. Calculate the beginning inventory for the first quarter:
- The ending inventory for December 31, 2010, is given as 94,500 units.
- Since the ending inventory equals 10% of the next quarter's sales, the first quarter's beginning inventory will be 10% of the second quarter's projected sales (1,360,000 units).
- Therefore, the beginning inventory for the first quarter is (10% * 1,360,000) = 136,000 units.
2. Calculate the budgeted beginning inventory for the second to fourth quarters:
- The ending inventory for each quarter equals 10% of the next quarter's sales. Therefore, the budgeted beginning inventory for the second quarter will be (10% * 980,000) = 98,000 units.
- Similarly, the budgeted beginning inventory for the third quarter will be (10% * 1,100,000) = 110,000 units.
- The budgeted beginning inventory for the fourth quarter will be 10% of the sales projected for the first quarter of 2012, which is (10% * 1,200,000) = 120,000 units.
3. Calculate the budgeted production for each quarter:
- To calculate the production for each quarter, add the beginning inventory for that quarter to the sales projection for that quarter, and deduct the budgeted beginning inventory for the next quarter.
- For the first quarter, the budgeted production would be (136,000 + 1,080,000 - 98,000) = 1,118,000 units.
- For the second quarter, the budgeted production would be (98,000 + 1,360,000 - 110,000) = 1,348,000 units.
- For the third quarter, the budgeted production would be (110,000 + 980,000 - 120,000) = 970,000 units.
- For the fourth quarter, the budgeted production would be (120,000 + 1,100,000 - 0) = 1,220,000 units.
4. Calculate the budgeted production for the entire year:
- To calculate the budgeted production for the year, sum up the production for each quarter.
- The total budgeted production for the year would be (1,118,000 + 1,348,000 + 970,000 + 1,220,000) = 4,656,000 units.
By following these steps, you can develop a quarterly production budget for 2011 and the total year.