Question

Gorberchev Food Processing expects to have 28,000 units of finished goods inventory on hand on March 31 and reports the following expected sales (in units) for the months of April through July: April 128,000 May 138,000 June 155,000 July 128,000 At the end of each month the company desires its ending finished goods inventory to be 25% of the next month's projected sales (in units). The budgeted production (in units) for Gorberchev Food Processing for May should be:

Answer 1

Total production= 142,250

Step-by-step explanation:

Giving the following information:

Sales (in units):

May=138,000

June= 155,000

At the end of each month the company desires its ending finished goods inventory to be 25% of the next month's projected sales (in units).

To calculate the units to be produced in May, we need to use the following formula:

Production= sales + desired ending inventory - beginning inventory

Budgeted production:

Sales= 138,000

Desired ending inventory= (155,000*0.25)= 38,750

Beginning inventory= (138,000*0.25)= (34,500)

Total production= 142,250