Answer:
Instructions are below.
Explanation:
Giving the following information:
Sales:
January 130,000
February 160,000
March 200,000
April 215,000
May 180,000
June 240,000
Beginning inventory for 2014 is 30,000 units.
The budgeted inventory at the end of a month is 40 percent of units to be sold the following month.
The purchase price per unit is $5.
<u>To calculate the production required for each month, we need to use the following formula:</u>
Production= sales + desired ending inventory - beginning inventory
<u>January:</u>
Sales= 160,000
Desired ending inventory= (160,000*0.4)= 64,000
Beginning inventory= (30,000)
Total= 164,000
Total cost= 164,000*5= $820,000
F<u>ebruary:</u>
Sales= 130,000
Desired ending inventory= (200,000*0.4)= 80,000
Beginning inventory= (64,000)
Total= 146,000
Total cost= 146,000*5= $730,000
<u>March:</u>
Sales= 200,000
Desired ending inventory= (215,000*0.4)= 86,000
Beginning inventory= (80,000)
Total= 206,000
Total cost= 206,000*5= $1,030,000
<u>April:</u>
Sales= 215,000
Desired ending inventory= (180,000*0.4)= 72,000
Beginning inventory= (86,000)
Total= 201,000
Total cost= 201,000*5= $1,005,000
<u>May:</u>
Sales= 180,000
Desired ending inventory= (240,000*0.4)= 96,000
Beginning inventory= (72,000)
Total= 204,000
Total cost= 204,000*5= $1,020,000
