Question

Suppose Chef Plus manufactures cast iron skillets. One model is a 10 inch skillet that sells for $26. Chef Plus projects sales of 650 10-inch skillets per month. The production costs are $13 per skillet for direct materials, $2 per skillet for direct labor, and $6 per skillet for manufaturing overhead. Chef Plus has 40 10-inch skillets in inventory at the beginning of July but wants to have an ending inventory equal to 30% of the next months sales. Selling and administrative expenses for this product line are $1,600 per month.

How many 10-inch skillets should Chef Plus produce in July?

A) 650

B) 885

C) 805

D) 845

Answer 1

Production= 805 units

Step-by-step explanation:

Giving the following information:

Chef Plus projects sales of 650 10-inch skillets per month.

Beginning inventory= 40 units

Desired ending inventory= 30% of the next months' sales.

To calculate the production for July, we need to use the following formula:

Production= sales + desired ending inventory - beginning inventory

Production= 650 + (650*0.3) - 40

Production= 805 units