- This topic has 3 replies, 2 voices, and was last updated 7 years ago by
.
- Posts
Budget for Quarters 1 to 3(000)
Q1. Q2. Q3
ActivitySales 18. 34. 30
Production
20. 40. 30In The current planning stage for quarter 4,flexible budgets are to be developed for low,most likely
and high sales volume(38000,44000 and 50000) units respectively.THE COMPANY WISHES TO HAVE A CLOSING INVENTORY(END OF QUARTER 4)EQUAL TO THE OPENING INVENTORY FOR QUARTER 1.MANGEMENT WILL THEREFORE ADJUST THE PRODUCTION LEVELS TO FALL IN LINE WITH THIS POLICY.Here is my question,Please tell that how to find closing inventory figure for quarter 4..In the solution it is written inventory of 8000 but I dont how it is calculated and matched with the opening inventory for quarter 1 and Please also explain me the meaning of the bold words that I have written above.
On the information you have typed, it is not possible to calculate the closing inventory for quarter 4 because you are not told what the opening inventory was for quarter 1.
However, I am guessing that the answer does not say that the inventory is 8,000, but that it is the change in the inventory.
The total sales in the first 3 quarters is 18 + 34 + 30 = 82
The total production in the first 3 quarters is 20 + 40 + 30 = 90Therefore the inventory will have increased by 90 – 82 = 8,000 over the first three quarters.
Therefore, for the inventory at the end of the fourth quarter to be the same as that at the start of the first quarter, the production in the 4th quarter will have to be 8,000 less than the sales in the fourth quarter.
Sir inventory for the first quarter is not specifically written but it is written as a company policy that company wishes to have a closing inventory(at the end of quarter 4) equal to the opening inventory of first quarter….
How we can find out the inventory of first quarter to comply with the policy and how we can say that inventory for the fourth quarter to be the same as quarter 1?
I have answered this already!!!!
You cannot calculate the inventory at the start of the first quarter because there is not enough information.
But you do not need to know what the inventory was in order to calculate the production in the 4th quarter. Please read my previous reply again carefully.
- The topic ‘Flexible Budget Question’ is closed to new replies.