Cardinal Company has finished goods inventory of 55,000 units on January 1. Its projected sales for the next four months are: January, 200,000 units; February, 180,000 units; March, 210,000 units; and April, 230,000 units. Cardinal Company wishes to maintain a desired ending finished goods inventory of 20% of the following month's sales.
-The budgeted units of production for February would be

Question

Cardinal Company has finished goods inventory of 55,000 units on January 1. Its projected sales for the next four months are: January, 200,000 units; February, 180,000 units; March, 210,000 units; and April, 230,000 units. Cardinal Company wishes to maintain a desired ending finished goods inventory of 20% of the following month's sales.​
-The budgeted units of production for February would be

Quizplus · Accepted Answer

To calculate the budgeted units of production for February, we need to consider the sales for February and the desired ending inventory for February, which is 20% of March's sales. Desired ending inventory for February = 20% of 210,000 = 42,000 units. Beginning inventory for February = 20% of February's sales = 36,000 units. Therefore, production for February = February sales + desired ending inventory - beginning inventory = 180,000 + 42,000 - 36,000 = 186,000 units.

Cardinal Company Has Finished Goods Inventory of 55,000 Units on January