Question

Bengal Co. provides the following unit sales forecast for the next three months: July August September Sales units 5,900 6,600 6,460 The company wants to end each month with ending finished goods inventory equal to 25% of the next month's sales. Finished goods inventory on June 30 is 1,475 units. The budgeted production units for July are:

Answer 1

Answer:

Units to be produced          6,075

Explanation:

July production budget

sales for the period           5,900

desired ending inventory

25% of next month

25% of August

25% of 6,600 =                   1,650  

Total requirement needs    7,550

Beginning Inventory           (1,475)

Units to be produced          6,075

The forecast sales and the desired ending inventory are the needs for production, the beginning inventory is an amount we already have. So it decreases our production demand.