Managerial Accounting: E22-8 Electro Company manufactures an innovative automobile
Managerial Accounting E22-8 Preparing production budgets (for two periods) Electro Company manufactures an innovative automobile transmission for electric cars. Management predicts that ending finished goods inventory for the first quarter will be 38,500 units. The following unit sales of the transmissions are expected during the rest of the year: second quarter, 221,000 units; third quarter, 497,000 units; and fourth quarter, 243,500 units. Company policy calls for the ending finished goods inventory of a quarter to equal 40% of the next quarter’s budgeted sales. (Ending inventory for the first quarter does not comply with company policy.)
Prepare a production budget for both the second and third quarters that shows the number of transmissions to manufacture.