Revenues and production budget

Price, Inc., bottles and distributes mineral water from the company's natural springs in northern Oregon. Price markets two products: 12-ounce disposable plastic bottles and 1-gallon reusable plastic containers.

Required:
1. For 2015, Price marketing managers project monthly sales of 420,000 12-ounce bottles and 170,000 1-gallon containers. Average selling prices are estimated at $0.20 per 12-ounce bottle and $1.50 per 1-gallon container. Prepare a revenues budget for Price, Inc., for the year ending December 31, 2015.
2. Price begins 2015 with 890,000 12-ounce bottles in inventory. The vice president of operations requests that 12-ounce bottles ending inventory on December 31, 2015, be no less than 680,000 bottles. Based on sales projections as budgeted previously, what is the minimum number of 12-ounce bottles Price must produce during 2015?
3. The VP of operations requests that ending inventory of 1-gallon containers on December 31, 2015, be 240,000 units. If the production budget calls for Price to produce 1,900,000 1-gallon containers during 2015, what is the beginning inventory of 1-gallon containers on January 1, 2015?

1.
Selling
Price Units
Sold Total
Revenues
12-ounce bottles $0.20 5,040,000a $1,008,000
1-gallon units 1.50 2,040,000b 3,060,000
$4,068,000
a 420,000 × 12 months = 5,040,000
b 170,000 × 12 months = 2,040,000

2. Budgeted unit sales (12-ounce bottles) 5,040,000
Add target ending finished goods inventory 680,000
Total requirements 5,720,000
Deduct beginning finished goods inventory 890,000
Units to be produced 4,830,000

3.
= 2,040,000 + 240,000 ? 1,900,000
= 380,000 1-gallon units