Question

Bengal Co. provides the following sales forecast for the next three months: July August September Sales units 11,500 12,200 6,250 The company wants to end each month with ending finished goods inventory equal to 20% of the next month's sales. Finished goods inventory on June 30 is 2,300 units. The budgeted production units for August are_________.

Answer 1

Budgeted production August in units = 11010 units

Step-by-step explanation:

The production units in a certain month will be equal to the production required to meet that month' sales plus 20% units of next month's sales.

The production in July will be,

• (11500 - 2300) + 12200 * 0.2 = 11640 units

• The opening inventory for August will be = 12200 * 0.2 = 2440 units

• The sales of August are expected to be = 12200

• Remaining unit production required for august sales = 12200 - 2440 = 9760 units
• August production for 20% of September sales = 6250 * 0.2 = 1250

Total budgeted production in August = 9760 + 1250 = 11010 units