Question

Fiwrt Corporation manufactures and sells stainless steel coffee mugs. Expected mug sales Fiwrt in units for the next three months are: October 30,000, November 36,000, December 34,000. Fiwrt likes to maintain a finished goods inventory equal to 30% of the next month's estimated sales. How many mugs should Fiwrt plan on producing during the month of November?

Answer 1

Fiwrt Corporation should plan to produce 35,400 stainless steel coffee mugs in November, after calculating based on their expected sales and inventory policy.

Step-by-step explanation:

To calculate the number of stainless steel coffee mugs Fiwrt Corporation should plan to produce in November, we will consider the given sales expectations along with their inventory policy. Fiwrt anticipates selling 36,000 mugs during November and would like to have an inventory equivalent to 30% of December's sales. Since December's expected sales amount to 34,000 units, 30% of that is 10,200 units (0.3 x 34,000). Fiwrt thus should have these 10,200 mugs on hand at the start of December.

Now, let's see how many mugs Fiwrt needs to produce in November. We start with the November sales forecast of 36,000 units, add the desired December inventory of 10,200 units, and from this sum we subtract the desired ending inventory for November (which is 30% of November's sales forecast). The calculation is then:

Production Needed = November Sales Forecast + Desired December Inventory - Desired November Ending Inventory

Desired November Ending Inventory = 30% of November's Forecast = 0.3 x 36,000 = 10,800 units

Production Needed = 36,000 + 10,200 - 10,800 = 35,400 units.

Therefore, Fiwrt Corporation should plan on producing 35,400 stainless steel coffee mugs during the month of November.