Question

Yosko Company expects to sell 2 comma 000 units of finished product in January and 2 comma 150 units in February. The company has 260 units on hand on January 1 and desires to have an ending inventory equal to 40​% of the next​ month's sales. March sales are expected to be 2 comma 270 units. Prepare Yosko​'s production budget for January and February.

Answer 1

Production budget

January 2,600 units

February 2,198 units

Step-by-step explanation:

The sales budget is adjusted for the projected opening and closing inventories unit to arrive at the production budget:

The production budget can be determined using the formula below

Production budget = Sales budget + closing inventory- opening inventory

January production budget

Sales budget = 2,000 units

Closing inventory = 40% × February sales = 40% × 2,150

Opening inventory = 260 units

Production budget for January = 2000 + (40% × 2,150) - 260= 2,600 units

February production budget

Sales budget = 2,150

Opening inventory = January closing inventory = 860 units

Closing inventory = 40% × March sales= 40% × 2,270

Production budget fro February = 2,150 + (40% × 2,270) - 860= 2,198 units

Production budget

January 2,600 units

February 2,198 units