Question

Cahuilla Corporation predicts the following sales in units for the coming four months: April May June July Sales in units 300 340 360 300 Each month's ending finished goods inventory should be 40% of the next month's sales. March 31 finished goods inventory is 120 units. A finished unit requires five pounds of direct material B at a cost of $2.00 per pound. The March 31 Raw Materials Inventory has 260 pounds of B. Each month's ending Raw Materials Inventory should be 30% of the following month's production needs. The budgeted production for May is:____________.

Answer 1

Answer:

Production budget for May = 336 units

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 volume + closing inventory - opening inventory

Closing inventory in May =40%× 300

opening inventory in May = Closing inventory in April= 40%×360

Production budget = 360 + (40%× 300) -(40%× 360)=336

Production budget for May = 336 units