Question

Suppose Chef Plus manufactures cast iron skillets. One model is a​ 10-inch skillet that sells for $ 35. Chef Plus projects sales of 650 ​10-inch skillets per month. The production costs are $ 6 per skillet for direct​ materials, $ 4 per skillet for direct​ labor, and $ 1 per skillet for manufacturing overhead. Chef Plus has 25 ​10-inch skillets in inventory at the beginning of July but wants to have an ending inventory equal to 30​% of the next​ month's sales. Selling and administrative expenses for this product line are $ 1 comma 400 per month. How many​ 10-inch skillets should Chef Plus produce in​ July?

Answer 1

Answer:

Production Budget  =   820 units

Explanation:

Chef Plus Manufacturers

Production Budget

The production budget is calculated by using the following formula.

Sales + Desired Ending Inventory - Opening Inventory= Production Budget

                                                                      Units

Sales                                                               650

+Desired Ending Inventory (30 % of 650 )    195

Less Opening Inventory                                  25

Production Budget                                        820

The desired ending inventory is calculated by finding the 30 % of 650 units which is given in the question .

Desired Ending Inventory = 30 % of Sales = 30 % of 650 = 195

Also the opening inventory is given for July= 25 units