Question

layne cedar manufactures cedar chests. the estimated number of chests for the first three months of 2016 is as follows: month sales january 10,000 february 14,000 march13,000 ending finished goods are equal to 30 percent of next month's sales. april 2016 sales are expected to total 16,000 units. what will be the number of chests produced in january

Answer 1

Layne Cedar needs to manufacture 14,200 chests in January to meet its sales goal and maintain the necessary ending inventory, which should be 30% of the next month's sales.

Step-by-step explanation:

To calculate the number of chests produced by Layne Cedar in January, we must account for the company's policy that ending finished goods are equal to 30 percent of the next month's sales. With February's sales expected to be 14,000 units, the January ending inventory should be 30% of 14,000, which is 4,200 units. Now, since January's expected sales are 10,000 units, we can add these two numbers to find out the total number of chests that need to be available for January. The total number of chests needed for January equals the sum of January sales and ending inventory for January (which is the beginning inventory for February): January Sales: 10,000 units, + January Ending Inventory: 4,200 units, = Total Chests Required for January: 14,200 units. If we assume that there is no beginning inventory in January or that the beginning inventory is already accounted for in the total requisite units, Layne Cedar will need to manufacture 14,200 cedar chests for January.