Figure 15-5
Canceco Company produces and sells pillows. It expects to sell 10,000 pillows in the year 2008 and had 1,000 pillows in finished goods inventory at the end of 2011. Canceco would like to complete operations in the year 2008 with at least 1,250 completed pillows in inventory. There is no ending work-in-process inventory. The pillows sell for £5 each.
-Refer to Figure 15-5. How many pillows would be produced in the year 2008?
A)10,000 pillows
B)11,000 pillows
C)11,250 pillows
D)10,250 pillows

Question

Quizplus · Accepted Answer

To meet the sales expectation and desired ending inventory, Canceco needs to produce enough pillows to cover both the sales and the increase in finished goods inventory. They plan to sell 10,000 pillows and want to increase their finished goods inventory from 1,000 to 1,250 pillows. Therefore, they need to produce 10,000 (for sales) + 250 (to increase inventory to 1,250) = 10,250 pillows.

Figure 15-5 Canceco Company Produces and Sells Pillows. It Expects to Sell