Question

Sunland manufactures competition stunt kites. In November, Jerry Box prepared the following production budget for the first quarter of the coming year. Desired ending inventory is based on the following month's budgeted sales. January February March Quarter Budgeted unit Sales 24,500 37,700 32,500 94,700 Budgeted ending inventory 7,540 6,500 2,770 2,770 Total units required 32,040 44,200 35,270 97,470 Beginning inventory 4,900 7,540 6,500 4,900 Budgeted production 27,140 36,660 28,770 92,570 Following higher-than-expected sales in December, Jerry conducted an inventory count on January 2 and discovered that the company had only 2,770 completed kites on hand. He decided that given the brisk sales in December, the company should increase its desired ending inventory level from 20 to 25 percent of the next month's sales volume.Prepare a new production budget for the first quarter.

Answer 1

Answer:

$\left[\begin{array}{ccccc}&January&February&March&Quarter\\ sales&24500&37700&32500&94700\\ Desired ending&9425&8125&3462.5&3462.5\\ Total Needs&33925&45825&35962.5&115712.5\\ beginning&2770&9425&8125&2770\\ Production Requirement&31155&36400&27837.5&95392.5\\\end{array}\right]$

Explanation:

We need to recalcualte the desired ending inventory

as currently they are calcualte at 20% and we want it at 25% we do cross multiplication

Jan: 7,540 / 20 x 25 = 9,425

We divide by 20 to get the value of a single percent f sales and then we multiply to 25 as it is our desired amount

Feb: 6,500 / 20 x  25  = 8,125

March:  2,770 / 20 x 25 = 3,462.5

Next we adjsut6 the beginning inventory for January as it is 2,770 instead of 4,900 and we can determiante the production budget need for the quarter