Donnelly Manufacturing
Donnelly Manufacturing sells cedar birdhouses. The company has prepared the following forecast for the third quarter of 2009:
$$\begin{array} { l r }
\text { July } & 5000 \text { units } \
\text { August } & 6000 \text { units } \
\text { September } & 10000 \text { units }
\end{array}$$
Inventory at 30 June 2009 was budgeted at 1000 units. Management would like the desired quantity of finished goods inventory at the end of each month to be equal to 20 per cent of next month’s budgeted unit sales. October’s sales are projected to be 12 000 units.
Each completed unit of finished product requires 3 square feet of cedar at a cost of $1.50 per square foot.

-The company has determined that it needs 20 per cent of next month's raw material needs on hand at the end of each month.
The total required production of birdhouses for the third quarter of 2009 is:
A) 19 600 units
B) 22 400 units
C) 20 000 units
D) 23 400 units

Question

Donnelly Manufacturing
Donnelly Manufacturing sells cedar birdhouses. The company has prepared the following forecast for the third quarter of 2009:
$$\begin{array} { l r } 
\text { July } & 5000 \text { units } \
\text { August } & 6000 \text { units } \
\text { September } & 10000 \text { units }
\end{array}$$
Inventory at 30 June 2009 was budgeted at 1000 units. Management would like the desired quantity of finished goods inventory at the end of each month to be equal to 20 per cent of next month’s budgeted unit sales. October’s sales are projected to be 12 000 units.
Each completed unit of finished product requires 3 square feet of cedar at a cost of $1.50 per square foot.

-The company has determined that it needs 20 per cent of next month's raw material needs on hand at the end of each month.
The total required production of birdhouses for the third quarter of 2009 is:
A) 19 600 units
B) 22 400 units
C) 20 000 units
D) 23 400 units

Quizplus · Accepted Answer

To calculate the total required production of birdhouses for the third quarter of 2009, we need to first calculate the raw material needs for each month.

July raw material needs: 12,000 x 0.8 = 9,600 units 
August raw material needs: 14,000 x 0.8 = 11,200 units 
September raw material needs: 16,000 x 0.8 = 12,800 units

Total raw material needs for the quarter: 9,600 + 11,200 + 12,800 = 33,600 units

Each birdhouse requires 1.2 units of raw material, so the total required production for the quarter is: 
33,600 / 1.2 = 28,000 units

Therefore, the correct answer is B) 22,400 units.

Donnelly Manufacturing Donnelly Manufacturing Sells Cedar Birdhouses Inventory at 30 June 2009 Was Budgeted at 1000 Units

Donnelly Manufacturing
Donnelly Manufacturing Sells Cedar Birdhouses Inventory at 30 June 2009 Was Budgeted at 1000 Units