Question

Suppose Cook Plus manufactures cast iron skillets. One model is a​ 10-inch skillet that sells for $ 22. Cook Plus projects sales of 650 ​10-inch skillets per month. The production costs are $ 11 per skillet for direct​ materials, $ 4 per skillet for direct​ labor, and $ 6 per skillet for manufacturing overhead. Cook Plus has 75 ​10-inch skillets in inventory at the beginning of July but wants to have an ending inventory equal to 40​% of the next​ month's sales. Selling and administrative expenses for this product line are $ 1,200 per month. Cook Plus has budgeted cost of goods sold of $ 13,650 for July.
Required:
1. How many 10-inch skillets should Chef Plus produce in July?

Answer 1

Answer:

Production budget = 835

Explanation:

The production budgeted for a particular period is the expected units to be produced after adjusting the sales budget figures for opening and closing inventories.  

Production = Sales budget + closing inventory - opening inventory

Inventory at the end of July = 40%×650= 260

Opening inventory = 75

Sales budget = 650

Production budget = 650+ 260  - 75= 835

Production budget = 835