Question

Ruiz Co. provides the following unit sales forecast for the next three months: January February March Sales units 3,000 4,200 5,000 The company wants to end each month with ending finished goods inventory equal to 10% of the next month’s sales. Finished goods inventory on December 31 is 300 units. The budgeted production units for February are:

Answer 1

The budgeted production units for February are: 4280 units

Step-by-step explanation:

Ruiz Co.

Particulars January February March

Sales units 3,000 4,200 5,000

-Opening Inventory 300 420 500

+Closing Inventory 420 500

Production Budget 3120 4280

The budgeted production units for February are: 4280 units

Production is calculated as

Production = Sales + Ending Inventory Less Opening Inventory

The Ending inventory of one month is the opening inventory of the next month.

Answer 2

The budgeted production in February is 4280 units.

Step-by-step explanation:

The ending inventory for January would be 10% of January's budgeted sales. Thus, the ending inventory will be = 4200 * 0.1 = 420 units

The budgeted production in February will be enough to meet the desired ending inventory for February and the remaining sales for the month of February after selling the opening inventory for February.

Desired ending inventory February = 5000 * 0.1 = 500 units

The budgeted production in February is,

Production = Closing Inventory + Sales - Opening inventory

Production = 500 + 4200 - 420 = 4280 units