Question

Teton Trails manufactures backpacks for adventurers. The backpacks come in two types: Daytripper, and Excursion. Teton anticipates the following production volumes:

Daytripper: 2,000 backpacks in July, 2,200 backpacks in August
Excursion: 1,200 backpacks in July, 900 backpacks in August
Teton’s policy is to maintain ending inventories at 5% of what is expected for the next month. What is the budgeted level of production in July for both styles?
A. 2,010 Daytripper backpacks and 1,185 Excursion backpacks.
B. 2,000 Daytripper backpacks and 1,200 Excursion backpacks.
C. 2,010 Daytripper backpacks and 1,185 Excursion backpacks.
D. 1,990 Daytripper backpacks and 1,215 Excursion backpacks.

Answer 1

The production level of Daytripper will be 2010 backpacks and the production level of Excursion will be 1185 backpacks. Thus, option C is the correct answer.

Step-by-step explanation:

The production volume in July can be calculated by adding the production for July and the closing inventory in July and deducting the opening inventory in July from it.

Production level = Closing Inventory + Production - Opening Inventory

Daytripper = (2200 * 0.05) + 2000 - (2000 * 0.05)

Daytripper = 2010

Excursion = (900 * 0.05) + 1200 - (1200 * 0.05)

Excursion = 1185