Asked by Vanessa Jimenez on Jul 07, 2024
Verified
A sales budget is given below for one of the products manufactured by the Key Co.: The inventory of finished goods at the end of each month should equal 20% of the next month's sales.However, on December 31 the finished goods inventory totaled only 4,000 units.
Each unit of product requires three specialized electrical switches.Since the production of these specialized switches by Key's suppliers is sometimes irregular, the company has a policy of maintaining an ending inventory at the end of each month equal to 30% of the next month's production needs.This requirement had been met on January 1 of the current year.
Required:
a.Prepare a budget showing the required production each month for January, February, March, and April.
b.Prepare a budget showing the quantity of switches to be purchased each month for January, February, and March.
March.
Sales Budget
A financial plan that estimates future sales in terms of units and revenue.
Finished Goods Inventory
Items that have completed the manufacturing process and are ready to be sold to customers.
Specialized Electrical Switches
Electrical switches designed for specific functions or applications, often requiring custom designs or specifications to meet unique operational or safety standards.
- Understand the relationship between sales and production budgeting.
- Calculate ending inventory levels based on sales budget projections.
- Prepare a sales budget incorporating inventory considerations.
Verified Answer
Learning Objectives
- Understand the relationship between sales and production budgeting.
- Calculate ending inventory levels based on sales budget projections.
- Prepare a sales budget incorporating inventory considerations.
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