The previous year's 4th quarter ending inventory of 700 units meets the minimum requirement. The expected production in the current 2nd Quarter is: Production Budget 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Expected Sales 7,000 5,000 8,000 6,000 Units Produced 6,800 To be determined To be determined To be determined Group of answer choices

5,300 units

6,800 units

4,500 units

5,000 units

5,300 units

Explanation:

Production Budget

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Expected Sales 7,000 5,000 8,000 6,000

-Beginning Inventory 700 500 800 600

+Ending Inventory 500 800 600

Production 6800 5300 7800

The ending inventory should meet the minimum requirements. It means it is at least ten percent of the current period sales. We calculate the ending inventory and find the production. The expected production in the current 2nd Quarter is 5,300 units.

The current option is 5,300 units

Explanation:

The key to unlocking this question is to understand the statement that 700 units of closing inventory in 4th quarter ending meets the minimum standard.

This implies that the current period closing inventory must be 10% of next period's sales as shown in the relationship between the previous 4th quarter and the present 1st quarter where the previous closing inventory is 10% of current quarter's sales:700/7000*100%=10%, this standard is meant to adhered to going forward.

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Sales volume 7000 5000 8000 6000

Opening inventory - 700 - 500 - 800 600

Closing inventory 500 * 800 600 unknown

Production 6800 5,300 7800 unknown

* This sign is draw attention to the closing stock being 10% of next quarter's sales.

6,800 units is a wrong option as that is production volume for 1st quarter

5,000 units is the sales volume for second quarter not production

4,500 units is non-existent.