Question

A company's sales budget indicates the following sales:
January: 25,000;
February: 30,000;
March: 35,000.
Beginning inventory is 12,000 and the company's ratio of inventory to future sales is estimated at 45%.
Units to be produced in January will be __________?

Answer 1

Answer:

26500.

Explanation:

Given: Sales of January, February and March.

           Beginning inventory is 12000.

           Company´s ratio of inventory to future sales is 45%.

Formula; unit to be produced= $(\textrm{ next month budgeted sales + present months sales budget- beginning inventory})$

First step: finding February´s budgeted sales

Next months (February) budgets sales= $\frac{45}{100} \times 30000= 13500.$

Now, putting values in the formula to find unit to be produced.

Unit to be produced in January= ($(13500 + 25000 - 12000)= (38500 - 12000)$

∴ Unit to be produced in the month of January is 26500.