Question

Steven's Co. provides the following sales forecast for the next three months: July August September Sales units 5,000 5,700 5,560 The company wants to end each month with ending finished goods inventory equal to 25% of the next month's sales. Finished goods inventory on June 30 is 1,250 units. The budgeted production units for July are:

a. 3,750 units.
b. 6,425 units.
c. 2,500 units.
d. 5,175 units.
e. 6,250 units.

Answer 1

d. 5,175 units.

Step-by-step explanation:

The computation of the budgeted production units for July is shown below:

= Sale units + ending inventory units - beginning inventory units

where,

Sale units is 5,000 units

Ending finished inventory units = 5,700 units × 25% = 1,425 units

Beginning finished inventory units = 1,250 units

Now put these units to the above formula

So, the units would equal to

= 5,000 units + 1,425 units - 1,250 units

= 5,175 units