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Paige Company-Prepare a production budget

Paige Company estimates that unit sales will be 10.800 in quarter 1, 12,800 in quarter 2, 14,400 in quarter 3, and 18,300 in quarter 4. Management desires to have an ending finished goods inventory equal to 24% of the next quarter’s expected unit sales. Prepare a production budget by quarters for the first 6 months of 2020.

Solution:

Paige Company
Sales Budget
For the Year Ended December 31, 2020
Quarters
12Six Months
Expected Unit Sales108001280023600
Add: Desired Ending Finished Goods Inventory307234563456
Total Required Units138721625627056
Less: Beginning Finished Goods Inventory-2592-3072-2592
Required Production Units112801318424464

Calculation of Inventory:

Quarter 1 Ending Inventory = 12,800 x 24% = 3,072 units

Quarter 2 Ending Inventory = 14,400 x 24% = 3,456

Quarter 1 Beginning Inventory = 10,800 x 24% = 2,592

Quarter 2 Beginning Inventory = Quarter 1 Ending Inventory

Paige Company estimates that unit sales will be 10.800 in quarter 1, 12,800 in quarter 2, 14,400 in quarter 3, and 18,300 in quarter 4. Management desires to have an ending finished goods inventory equal to 24% of the next quarter's expected unit sales. Prepare a production budget by quarters for the first 6 months of 2020.

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