Question

Ruiz Co. provides the following sales forecast for the next four months. April May June July Sales (units) 500 580 540 620 The company wants to end each month with ending finished goods inventory equal to 25% of next month’s forecasted sales. Finished goods inventory on April 1 is 190 units. Prepare a production budget for the months of April, May, and June.

Answer 1

Answer:

Instructions are below.

Explanation:

Giving the following information:

Sales:

April= 500

May= 580

June= 540

July= 620

Finished goods inventory on April 1 is 190 units

Desired ending inventory= 25% next month sales.

To calculate the production for each month, we need to use the following formula:

Production= sales + desired ending inventory - beginning inventory

April:

Sales= 500

Desire ending inventory= (580*0.25)= 145

Beginning inventory= (190)

Total production= 455 units

May:

Sales= 580

Desire ending inventory= (540*0.25)= 135

Beginning inventory= (145)

Total production= 570 units

June:

Sales= 540

Desire ending inventory= (620*0.25)= 155

Beginning inventory= (135)

Total production= 560 units