Answer:
a.
________________________________February__March__April
Ending inventory 20% of next Months sale _3400___3600__5,000
Beginning inventory__________________ 2,000__ 3400__ 3600
Budgeted sales _____________________ 13,000__17,000_ 18,000
Budgeted production_________________ 14,400__ 17,200_ 19,400
b.
Firms wants to hold the finished goods inventry in order to deal with the future demand
Explanation:
a.
Use the following formula to calculate the Budgeted production
Budgeted Production = Beginning Inventory - Ending Inventory + Busgeted Sales
Working
________________________________February__March__April
Ending inventory 20% of next Months sale _3400___3600__5,000
Less: Beginning inventory______________2,000__ 3400__ 3600
Add: Budgeted sales _________________ 13,000__17,000_ 18,000
= Budgeted production________________14,400__ 17,200_ 19,400
b.
The finished goods inventory is held to deal with the future market demand. If the firm produce the uniits equals o the current demand then in case of increase in demand or unexpected demand increase the firms will not be able to fulfil the demand and will lose the opportunity.
