Question

(TYPE 6) Given that beginning inventory level is 660 units, total forecasted demand over the next 12 months is 18,000 units, and desired ending inventory level at the end of the 12th month is 900 units, what is the cost of production per month if a level strategy is used and per unit cost of production is $22

Answer 1

Answer: $33,440

Explanation:

First find the units to be produced for the year:

= Forecasted demand + Closing inventory - Opening inventory

= 18,000 + 900 - 660

= 18,240 units

Cost of production:

= 18,240 * 22

= $401,280

Cost per month:

= 401,280 / 12

= $33,440