Question

Creasy Inc, policy calls for the given month's ending finished goods inventory to equal 75% of the next month's expected sales units.

June 30 finished goods inventory is 17,250 units, which complies with the policy.
Complete the Production Budget for Creasy. Use the question(s) above for additional information.
Do not use dollar signs ($) in your answer.
Production Budget
Production Budget July August September
Budgeted Ending Inventory 18,750
Budgeted Sales Units 25,000
Less Beginning Inventory 20,250
Total units to be produced in the period

Answer 1

To complete the production budget, July's production is calculated to be 26,500 units, taking into account August's budgeted sales of 25,000 units and abiding by Creasy Inc.'s inventory policy.

Step-by-step explanation:

The student is dealing with a production budget problem in which Creasy Inc.'s policy requires that the ending finished goods inventory should be 75% of the following month's expected sales units. For June 30, the ending finished goods inventory is 17,250 units. We can calculate July's required production by considering August's sales forecast and the starting inventory, which will be June's ending inventory.

As the policy dictates, July's ending inventory must be 75% of August's sales, and August's sales are expected to be 25,000 units:
July Ending Inventory = 25,000 units * 75% = 18,750 units.
Since June 30 ending inventory is 17,250 units, we'll use it as July's beginning inventory:
July Beginning Inventory = 17,250 units.
Therefore, the total units to be produced in July to meet sales and inventory policy is:
July Production = (Budgeted Sales + Budgeted Ending Inventory) - Beginning Inventory = (25,000 + 18,750) - 17,250 = 26,500 units.

Answer 2

The question involves completing a Production Budget for Creasy Inc by calculating the total units to be produced for August. The calculation is based on the company policy that requires the ending finished goods inventory to be 75% of the next month's sales. With the given information, the total units to be produced in August are found to be 25,000 units.

Step-by-step explanation:

To complete the Production Budget for Creasy Inc, we need to understand the company's inventory policy, which states that the ending finished goods inventory should be 75% of the next month's expected sales units. According to the information given, the June 30 finished goods inventory is 17,250 units. For July, the budgeted ending inventory is 18,750 units, and budgeted sales units are expected to be 25,000.

The beginning inventory for August would be the same as the ending inventory for July, which is 18,750 units. Since the budgeted ending inventory should be 75% of the next month's sales, and we know September's expected sales are 25,000 units, the calculation would be:

• Budgeted Ending Inventory for August = 25,000 units * 75% = 18,750 units
• Less Beginning Inventory for August = July's Ending Inventory = 18,750 units
• Total units to be produced in August = Budgeted Sales Units + Budgeted Ending Inventory - Less Beginning Inventory
• Total units to be produced in August = 25,000 units + 18,750 units - 18,750 units = 25,000 units

For September, the production budget is not provided, but if we were given estimated sales for October, we could determine September's ending inventory using the same method.