The January 1, 2017, inventory of HD-240 is 2,040 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.

Management desires an ending inventory each quarter equal to 40% of the next quarter's sales so the closing inventory 2040 is the 40% of 1st quarter 2017 (Jan-Mar).

40% = 2040

Reverse the 40% in to 100 to find the 100% forecasted sales for QTR-1

we have:

100% = 2040/40%

100% = 5100 is the 1st quarter sale

40% ending inventory = 2040

Total production for quarter-1 = 5100+2040 = 7140

Total production for quarter-2 = 5100+2040 = 7140

Total production for quarter-3 = 5100+2040 = 7140

production for the first three quarter will remain the same but in 4th quarter it will change because the sale for the qrt-1 of 2018 is expected to be increased by 25%, so the production of Qrt-4 of 2017 is as follows:

will multiply the total quarterly sales with 1.25 i. e 100+25%

Quarter-4 sale = 5100*1.25 = 6375

closing inventory 40%=6375*40% = 2550

Qrt-4 production = Quarter-4 sale = 5100 + 2550

Qrt-4 production = 7650

Total production for 2017 = 7140+7140+7140+7650

Total production for 2017 = 29070