Question

Vermicelli Company plans to sell 200,000 units of finished product in July and anticipates a growth rate in sales of 5% per month. The desired monthly ending inventory in units of finished product is 80% of the next month's estimated sales. There are 150,000 finished units in inventory on June 30.Vermicelli Company's production requirement in units of finished product for the three-month period ending September 30 is: (CMA adapted)712,025 units.

Answer 1

Production budget in July = 218,000 units

Step-by-step explanation:

Production budget = sales budget + closing inventory - opening inventory

August sales = 105%× July sales

= 105%× 200,000 = 210,000

Closing inventory in July = 80% × August sales

= 80% ×210,000 = 168,000

Opening inventory in July = Closing inventory in June = 150 000 units

Production budget in July = 200,000 + 168000 - 150,000

= 218,000 units

Production budget in July = 218,000 units