Question

Etmer enterprises has budgeted sales for the next four months as follows: budgeted sales in units january 7,400 units february 4,600 units march 5,300 units april 3,900 units past experience has shown that the ending inventory for each month should be equal to 25% of the next month's expected sales in units. the company is currently preparing a production budget. calculate the total number of units budgeted to be produced in february.

Answer 1

Units to be produced in February is calculated as -

Units to be produced in February = February sales + Ending inventory of February - Beginning inventory

February sales = 4,600 units

Ending inventory = 25 % * Sales of March = 25 % * 5,300 units = 1,325 units

Beginning inventory - 25 % * Sales of February = 25 % * 4,600 unit = 1,150 units

Units to be produced in February = 4,600 units + 1,325 units - 1,150 units

Units to be produced in February = 4,775 units