Question

harden, incorporated, has budgeted sales in units for the next five months as follows: june 7,800 units july 6,100 units august 7,900 units september 7,600 units october 5,700 units past experience has shown that the ending inventory for each month should be equal to 20% of the next month's sales in units. the inventory on may 31 contained 1,560 units. the company needs to prepare a production budget for the next five months. the beginning inventory for september should be:

Answer 1

The beginning inventory for September should be 1,140 units, which is 20% of October's budgeted sales.

Step-by-step explanation:

To calculate the beginning inventory for September, we should refer to the desired ending inventory for August, as the ending inventory of one month becomes the beginning inventory of the next month. According to the budget, the ending inventory for each month should be 20% of the next month's sales in units. Therefore, to find the beginning inventory for September, we look at October's budgeted sales.

October's budgeted sales are 5,700 units. Taking 20% of this number gives us 5,700 units * 0.20 = 1,140 units. Thus, the beginning inventory for September should be 1,140 units.