Shocker Corporation's sales budget shows quarterly sales for the next year as follows: Unit sales Quarter 1 15,400 units Quarter 2 11,000 units Quarter 3 19,500 units Quarter 4 22,700 units Corporation policy is to have a finished goods inventory at the end of each quarter equal to 20% of the next quarter's sales. Budgeted production for the second quarter of the next year would be:

Production for Q2 12,700 units

Explanation:

Q2

sales for the quarter 11,000 units

desired ending inventory

20% of Q3

20% of 19,500 = 3,900 units

Total requirement 14,900 units

Beginning inventory

20% of Q2 sales

20% of 11,000 = (2,200) units

Production for Q2 12,700 units

We add the sales and the desired inventory as the production needs.

The beginning inventory is subtracted, those units is work done towards the goal, so we need to produce the differente, which is 12,700 units.