The sales budget for Modesto Corp. shows that 23,000 units of Product A and 25,000 units of Product B are going to be sold for prices of $9 and $11, respectively. The desired ending inventory of Product A is 20% higher than its beginning inventory of 2,300 units. The beginning inventory of Product B is 2,800 units. The desired ending inventory of B is 3,300 units. Total budgeted sales of both products for the year would be:

Total budgeted sales Product A $207,000

Total budgeted sales Product B $ 275,000      

Total budgeted sales of both products for the year would be:$ 482,000

Explanation:

Modesto Corp

Sales Budget

                                       Product A                  Product B

Sales Units                       23,000                     25,000

Sales Price                        $ 9                             $ 11                

Total budgeted sales     $207,000                $ 275,000        

WE  multiply the units sales with the sale price to get the total budgeted sales.

The desired inventory is required in the production budget not in the sales budget and is used as follows.

Modesto Corp

Production Budget

                                        Product A                  Product B

Sales                                23,000                     25,000

+Desired Ending

Inventory                           2760                       3300

- Beginning Inventory       2300                        2800

Budgeted Production      23460                       25,500

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