units Fourth quarter: 10,400 units Unit sales are expected to increase 20%, and each unit is expected to sell for $5. Management prefers to maintain ending finished goods inventory equal to 15% of next quarter's sales. Assume finished goods inventory at the end of the fourth quarter budget period is estimated to be 2,000 units. Required: (1) Prepare a sales budget for Cathy's Cookies. (2) Prepare a production budget for Cathy's Cookies. (3) What can you interpret about Cathy's Cookies Sales Budget? Trends?

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Problem #6: Operating Budgets
Cathy's Cookies produces cookies for resale at local grocery stores. The company is currently in the process of establishing a
master budget on a quarterly basis for this coming fiscal year, which ends December 31. Prior year quarterly sales were as
follows (1 unit = 1 batch):
First quarter:
Second quarter:
Third quarter:
8,000 units
9,600 units
12,000
Transcribed Image Text:Problem #6: Operating Budgets Cathy's Cookies produces cookies for resale at local grocery stores. The company is currently in the process of establishing a master budget on a quarterly basis for this coming fiscal year, which ends December 31. Prior year quarterly sales were as follows (1 unit = 1 batch): First quarter: Second quarter: Third quarter: 8,000 units 9,600 units 12,000
units
Fourth quarter:
10,400
units
Unit sales are expected to increase 20%, and each unit is expected to sell for $5. Management prefers to maintain ending
finished goods inventory equal to 15% of next quarter's sales. Assume finished goods inventory at the end of the fourth
quarter budget period is estimated to be 2,000 units.
Required:
(1)
Prepare a sales budget for Cathy's Cookies.
(2)
Prepare a production budget for Cathy's Cookies.
(3)
What can you interpret about Cathy's Cookies Sales Budget? Trends?
Transcribed Image Text:units Fourth quarter: 10,400 units Unit sales are expected to increase 20%, and each unit is expected to sell for $5. Management prefers to maintain ending finished goods inventory equal to 15% of next quarter's sales. Assume finished goods inventory at the end of the fourth quarter budget period is estimated to be 2,000 units. Required: (1) Prepare a sales budget for Cathy's Cookies. (2) Prepare a production budget for Cathy's Cookies. (3) What can you interpret about Cathy's Cookies Sales Budget? Trends?
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