Asked by Ramon Gonzalez on May 18, 2024
Verified
Jannusch Corporation makes one product. Budgeted unit sales for July, August, September, and October are 10,000, 11,600, 13,300, and 12,700 units, respectively. The ending finished goods inventory should equal 20% of the following month's sales. The budgeted required production for August is closest to:
A) 11,600 units
B) 11,940 units
C) 14,260 units
D) 16,580 units
Finished Goods Inventory
The stock of completed products that have not yet been sold to customers.
Required Production
The amount of production a company needs to meet its sales goals and inventory policies, often calculated based on forecasted sales plus target ending inventory minus beginning inventory.
- Attain knowledge on the conception and arrangement of diverse financial budgets, like sales, manufacturing overhead, cash, direct materials, and production budgets.
- Engage in budgetary planning to deduce necessary production outputs in relation to sales anticipation and inventory requirements.
Verified Answer
CM
Cristian MelenaMay 22, 2024
Final Answer :
B
Explanation :
Step 1: Calculate the desired ending finished goods inventory for each month
- August: 20% of September sales = 0.20 x 13,300 = 2,660 units
- September: 20% of October sales = 0.20 x 12,700 = 2,540 units
- October: no inventory needed since it is the final month
Step 2: Calculate the total units needed for each month
- August: (10,000 + 2,660) - beginning inventory = 12,660 units
- September: (11,600 + 2,540) - 2,660 = 11,480 units
- October: (13,300 + 0) - 2,540 = 10,760 units
Step 3: Use the information to find the budgeted required production for August
- August production = August sales + desired ending inventory - beginning inventory
- August production = 11,600 + 2,660 - 0 = 14,260 units
Therefore, the closest option is B) 11,940 units.
- August: 20% of September sales = 0.20 x 13,300 = 2,660 units
- September: 20% of October sales = 0.20 x 12,700 = 2,540 units
- October: no inventory needed since it is the final month
Step 2: Calculate the total units needed for each month
- August: (10,000 + 2,660) - beginning inventory = 12,660 units
- September: (11,600 + 2,540) - 2,660 = 11,480 units
- October: (13,300 + 0) - 2,540 = 10,760 units
Step 3: Use the information to find the budgeted required production for August
- August production = August sales + desired ending inventory - beginning inventory
- August production = 11,600 + 2,660 - 0 = 14,260 units
Therefore, the closest option is B) 11,940 units.
Learning Objectives
- Attain knowledge on the conception and arrangement of diverse financial budgets, like sales, manufacturing overhead, cash, direct materials, and production budgets.
- Engage in budgetary planning to deduce necessary production outputs in relation to sales anticipation and inventory requirements.
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