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

To develop a quarterly production budget for 2011 and for the year in total, follow these steps:

Step 1: Calculate the beginning inventory for the first quarter:
The ending inventory for December 31, 2010, is given as 94,500 units.

Step 2: Calculate the budgeted beginning inventory for the second to fourth quarters:
The budgeted beginning inventory for each quarter is scheduled to equal 10% of the next quarter's budgeted sales.

For the second quarter, the budgeted beginning inventory will be 10% of the sales projected for the first quarter (1,080,000 units). Therefore, it will be 10% of 1,080,000 = 108,000 units.
For the third quarter, it will be 10% of the sales projected for the second quarter (1,360,000 units). Therefore, it will be 10% of 1,360,000 = 136,000 units.
For the fourth quarter, it will be 10% of the sales projected for the third quarter (980,000 units). Therefore, it will be 10% of 980,000 = 98,000 units.

Step 3: Calculate the budgeted production for each quarter:
Budgeted production is the sum of the sales projection for each quarter and the desired ending inventory for that quarter.

For the first quarter, the budgeted production will be the sales projection for that quarter (1,080,000 units).
For the second quarter, the budgeted production will be the sales projection for that quarter (1,360,000 units) plus the desired ending inventory for the second quarter (108,000 units).
For the third quarter, the budgeted production will be the sales projection for that quarter (980,000 units) plus the desired ending inventory for the third quarter (136,000 units).
For the fourth quarter, the budgeted production will be the sales projection for that quarter (1,100,000 units) plus the desired ending inventory for the fourth quarter (98,000 units).

Step 4: Calculate the budgeted production for the year:
The budgeted production for the year is the sum of the budgeted production for each quarter.

Once you have performed these calculations, you will have the quarterly production budget for 2011 and the total production budget for the year.