Exercise 20-12 Manufacturing: Preparing production budgets (for two periods) LO P1 Electro Company manufactures an innovative automobile transmission for electric cars. Management predicts that ending finished goods inventory for the first quarter will be 168,800 units. The following unit sales of the transmissions are expected during the rest of the year: second quarter, 422,000 units; third quarter, 349,000 units; and fourth quarter, 255,500 units. Company policy calls for the ending finished goods inventory of a quarter to equal 40% of the next quarter's budgeted sales. Prepare a production budget for both the second and third quarters that shows the number of transmissions to manufacture. ELECTRO COMPANY Production Budget Second and Third Quarters Second Quarter Budgeted unit sales for quarter 422,000 Budgeted ending inventory (units) 139,600 Required units of available production 561,600 Budgeted beginning inventory (units) 168,800 Units to be produced Third Quarter 349,000 102,200 451,200