Question

The Cardinal Company had a finished goods inventory of 55,000 units on January 1. Its projected sales for the next four months were: January - 200,000 units; February - 180,000 units; March - 210,000 units; and April - 230,000 units. The Cardinal Company wishes to maintain a desired ending finished goods inventory of 20% of the following month’s sales.

What is the budgeted units of production for January?

a.200,000

b.181,000

c.219,000

d.236,000

Q2:

The Cardinal Company had a finished goods inventory of 55,000 units on January 1. Its projected sales for the next four months were: January - 200,000 units; February - 180,000 units; March - 210,000 units; and April - 230,000 units. The Cardinal Company wishes to maintain a desired ending finished goods inventory of 20% of the following month's sales.

What is the budgeted units of production for February?

a.174,000

b.222,000

c.186,000

d.181,000

Answer 1

To calculate the budgeted units of production for January, we add 20% of February's projected sales to the projected sales for January. The correct answer is 236,000. To calculate the budgeted units of production for February, we add 20% of March's projected sales to the projected sales for February. The correct answer is 222,000.

Step-by-step explanation:

To calculate the budgeted units of production for January, we need to consider the desired ending finished goods inventory for February. The question states that the desired ending finished goods inventory is 20% of the following month's sales. So we calculate 20% of February's projected sales (180,000 units), which is 36,000 units. Adding this to the projected sales for January (200,000 units), the budgeted units of production for January is 236,000 units. Therefore, the correct answer is d. 236,000.

To calculate the budgeted units of production for February, we need to consider the desired ending finished goods inventory for March. The question states that the desired ending finished goods inventory is 20% of the following month's sales. So we calculate 20% of March's projected sales (210,000 units), which is 42,000 units. Adding this to the projected sales for February (180,000 units), the budgeted units of production for February is 222,000 units. Therefore, the correct answer is b. 222,000.

Answer 2

The budgeted units of production for January is $236,000

The budgeted units of production for February is $186,000

Step-by-step explanation:

• Goods inventory = 55,000

• Sales are:

• January - 200,000 units

• February - 180,000 units

• March - 210,000 units

• April - 230,000
• The Increase in inventory is as follows,
• = (180,000×20%)
• = 36000
• Sales for January = 200,000
• Therefore 200,000 + 36000
• Budgeted production for January = Increase in inventory + Sales for January

• Budgeted production for January = $36000 + $200000
• Budgeted production for January = $236,000
• QUESTION 2
• Computing budgeted units of production for February,
• Increase in inventory = (210,000×20%) - (180,000×20%)
• = 42000 ₋ 36000
• = 6000
• Sales for February = 180,000
• Budgeted production for January = Increase in inventory + Sales for February
• = $6000 + $180000
• = $186,000
• The budgeted units of production for February = $186,000