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27 October, 05:55

Turney Company produces and sells automobile batteries, the heavy-duty HD-240. The 2017 sales forecast is as follows. Quarter HD-240 1 5,200 2 7,150 3 8,320 4 10,190 The January 1, 2017, inventory of HD-240 is 2,080 units. Management desires an ending inventory each quarter equal to 40% of the next quarter's sales. Sales in the first quarter of 2018 are expected to be 25% higher than sales in the same quarter in 2017. Prepare quarterly production budgets for each quarter and in total for 2017.

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  1. 27 October, 06:16
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    Q1 Production 5,980 batteries

    Q2 Production 7,618 batteries

    Q3 Production 9,068 batteries

    Q4 Production 8,714 batteries

    Total production for the year is 31,380

    Explanation:

    Turney Company 2017 Quarterly Production Budgets

    Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018

    Sales 5,200 7,150 8,320 10,190 6,500*

    Opening inventory (2,080) (2,860) (3328) (4076) (2600)

    Closing inventory 2,860 3328 4076 2600 -

    Production required 5,980 7,618 9,068 8,714

    Sales in Q1 2018=Q1 2017 * (1+25%)

    Q1 2017 Sales is 5,200

    sales in Q1 2018=5,200 * (1+25%)

    =5,200 * (1+0.25)

    =5,200*1.25

    =$6500*

    Sample calculation of closing inventory=40%*next quarter's sales

    Q1 2017 closing inventory = 7150*40%=2860

    Q 2 2017 closing inventory = 8320*40%=3328

    Q 3 2017 closing inventory = 10190*40%=4076

    Q 4 2017 closing inventory = 6,500*40%=2600

    Total production for the year = 5980+7618+9068+8714

    =31,380
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