Vaughn Manufacturing estimates its sales at 280000 units in the first quarter and that sales will increase by 25000 units for each subsequent quarter over the year. The company has, and desires, an ending finished goods inventory equal to 25% of next quarter's sales. Each unit sells for $25. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. The remainder is collected in the quarter following sale. Production in units for the third quarter should be budgeted at 321250. 418750. Ⓒ330000. 336250.
Vaughn Manufacturing estimates its sales at 280000 units in the first quarter and that sales will increase by 25000 units for each subsequent quarter over the year. The company has, and desires, an ending finished goods inventory equal to 25% of next quarter's sales. Each unit sells for $25. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. The remainder is collected in the quarter following sale. Production in units for the third quarter should be budgeted at 321250. 418750. Ⓒ330000. 336250.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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2. Vaughn manufacturing estimates its sales at 280000 units in the first quarter and that sales will increase by 25000 units…
Transcribed Image Text:Vaughn Manufacturing estimates its sales at 280,000 units in the first quarter and that sales will increase by 25,000 units for each subsequent quarter over the year. The company has, and desires, an ending finished goods inventory equal to 25% of the next quarter’s sales. Each unit sells for $25. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. The remainder is collected in the quarter following sale.
Production in units for the third quarter should be budgeted at:
- 321,250
- 418,750
- 330,000
- 336,250
Expert Solution
Step 1 Introduction
The production budget is produced from a combination of the sales forecast and the anticipated quantity of completed goods inventory to have on hand. This combination is used to determine the number of units of items that are required to be made (usually as safety stock to cover for unexpected increases in demand).
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