Question

Sleepgood Company produces and sells pillows. It expects to sell 15,000 pillows in the next year and will have 1,500 pillows in finished goods inventory at the end of the current year. Sleepgood would like to complete operations next year with at least 1,350 completed pillows in inventory. There is no ending work-in-process inventory. The pillows sell for $6 each. How many pillows would be produced in the next year?

Answer 1

Answer:

Pillows to be produced next year =14,850 units

Explanation:

The expected units of a product that a business estimates to manufacture gives its sales budget and inventory is known as the production budget.

The production budget can bed determined by adjusting the sales budget for closing and opening inventories.

Production budget = Sales budget +closing inventory - opening inventory

No that the opening inventory for next year would be the closing inventory for the current year. Therefore, the opening inventory for next year is 1,500 units.

Sales budget for next year - 15,000, closing inventory -1,350

Production budget = 15,000 + 1,350 - 1,500

                               =  14,850 units

Pillows to be produced next year =14,850 units