Question

Cahuilla Corporation predicts the following sales in units for the coming four months: April May June July Sales in Units 370 410 430 370 Each month's ending finished goods inventory should be 30% of the next month's sales. March 31 finished goods inventory is 111 units. A finished unit requires 5 pounds of direct material B at a cost of $3.00 per pound. The March 31 Raw Materials Inventory has 220 pounds of B. Each month's ending Raw Materials Inventory should be 20% of the following month's production needs. The budgeted production for May is: Multiple Choice 360 units. 287 units. 539 units. 410 units. 416 units.

Answer 1

The budgeted production for May is 416 units

Step-by-step explanation:

For computing the budgeted production the following equation is to be applied which is shown below:

= may sales units + closing inventory - opening inventory

where,

may sales units = 410 units

closing inventory is 30% of next month sales which means 30% of june which comes to be 30% × 430 = 129

and for opening inventory the same ratio is applied i.e. 30% of current month sales which equals to 30% × 410 = 123

Now, apply these values to the above equation

= may sales units + closing inventory - opening inventory

= 410 + 129 - 123

= 416 units.

Thus, The budgeted production for May is 416 units