Question

Rodriquez Company budgeted the following sales in units: January 30,000 February 20,000 March 40,000 Rodriquez's policy is to have 20% of the following month's sales in inventory. On January 1, inventory equaled 7,500 units. February production in units is?

Answer 1

24,000 units

Step-by-step explanation:

Given:

Budgeted sales for January = 30,000

Budgeted sales for February = 20,000

Opening inventory in January = 7,500

Desired ending inventory = 20% of sales in February

= 0.2 × 20,000

= 4,000 units

Units required in January = 30,000 + 4,000

= 34,000 units

Units to be produced in January = 34,000 - opening inventory

= 34,000 - 7,500

= 26,500 units

Budgeted sales for February = 20,000

Budgeted sales for March = 40,000

Opening inventory in February is closing inventory of January = 4,000

Desired ending inventory = 20% of sales in March

= 0.2 × 40,000

= 8,000 units

Units required in February = 20,000 + 8,000

= 28,000 units

Units to be produced in February = 28,000 - opening inventory

= 28,000 - 4,000

= 24,000 units