Question

LO 7.2Rehydrator makes a nutrition additive and expects to sell 3,000 units in January, 2,000 in February, 2,500 in March, 2,700 in April, and 2,900 in May. The required ending inventory is 20% of the next month's sales, and the beginning inventory on January 1 was 600 units. Prepare a production budget for the first four months of the year.

Answer 1

Instructions are below.

Step-by-step explanation:

Giving the following information:

Sales in units:

January= 3,000

February= 2,000

March= 2,500

April= 2,700

May= 2,900

The required ending inventory is 20% of the next month's sales, and the beginning inventory on January 1 was 600 units.

The production budget for each month is calculated using the following formula:

Production= sales + desired ending inventory - beginning inventory

Production budget:

January:

Sales= 3,000

Ending inventory= (2,000*0.2)= 400

Beginning inventory= (600)

Total= 2,800

February:

Sales= 2,000

Ending inventory= (2,500*0.2)= 500

Beginning inventory= (400)

Total= 2,100

March:

Sales= 2,500

Ending inventory= (2,700*0.2)= 540

Beginning inventory= (500)

Total= 2,540

April:

Sales= 2,700

Ending inventory= (2,900*0.2)= 580

Beginning inventory= (540)

Total= 2,740