Question

Krier Industries has just completed its sales forecasts and its marketing department estimates that the company will sell 48,000 units during the upcoming year. In the past, management has maintained inventories of finished goods at approximately 3 months' sales. However, the estimated inventory at the start of the year of the budget period is only 8,000 units. Sales occur evenly throughout the year. What is the estimated production level (units) for the first month of the upcoming budget year

Answer 1

Total production= 8,000 units

Step-by-step explanation:

Giving the following information:

Forecast sales for the year= 48,000 units

Desired ending inventory= 3 months of sales

Beginning inventory= 8,000 units.

First, we need to determine the number of units sold each month:

Units sold for a month= 48,000/12= 4,000 units

Now, we can determine the production for each month:

Sales a month= 4,000

Desired ending inventory= 4,000*3= 12,000

Beginning inventory= (8,000)

Total production= 8,000 units