Question

Bambino Sporting Goods makes baseball gloves that are very popular in the spring and early summer season. Units sold are anticipated as follows: Monthly Unit Sales 4,000 8,000 13,000 11,000 March April May June Total units 36,000 sold If seasonal production is used, it is assumed that inventory will directly match sales for each month and there will be no inventory buildup The production manager thinks the preceding assumption is too optimistic and decides to go with level production to avoid being out of merchandise. He will produce the 36,000 units over four months at a level of 9,000 per month.

a. What is the ending inventory at the end of each month?
b. If the inventory costs $12 per unit and will be financed at the bank at a cost of 6 percent, what is the monthly financing cost and the total for the four months?

Answer 1

Bambino Sporting Goods

a. March April May June

Ending Inventory 5,000 6,000 2,000 0

b. Monthly financing cost = $540

Total for the four months = $2,160

Step-by-step explanation:

a) Data and Calculations:

March April May June

Beginning Inventory 0 5,000 6,000 2,000

Production 9,000 9,000 9,000 9,000

Monthly sales 4,000 8,000 13,000 11,000

Ending Inventory 5,000 6,000 2,000 0

Cost of inventory = $12 per unit

Monthly financing cost = $540 ($108,000 * 6% * 1/12)

Total financing cost for the four months = $2,160 ($540 * 4)