Thurston Products Thurston Products sells a popular style of running shoe. The company has prepared the following sales forecast for the second quarter of 2012:
Ending inventory at March 31, 2012 was budgeted at 7,500 pairs. Management would like the desired quantity of finished goods inventory at the end of each month to be equal to 15 percent of next month's budgeted unit sales. July's sales are projected to be 135,000 pairs.
Each completed unit of finished product requires 2 pounds of rubber material at a cost of $1.75 per pound. The company has determined that it needs 20 percent of next month's raw material needs on hand at the end of each month.
Refer to the Thurston Products information above. The total required production of running shoes for the second quarter of 2012 is:
A) 315,000 pairs
B) 327,750 pairs
C) 302,250 pairs
D) 287,250 pairs

Question

Thurston Products Thurston Products sells a popular style of running shoe. The company has prepared the following sales forecast for the second quarter of 2012:
 Ending inventory at March 31, 2012 was budgeted at 7,500 pairs. Management would like the desired quantity of finished goods inventory at the end of each month to be equal to 15 percent of next month's budgeted unit sales. July's sales are projected to be 135,000 pairs.
Each completed unit of finished product requires 2 pounds of rubber material at a cost of $1.75 per pound. The company has determined that it needs 20 percent of next month's raw material needs on hand at the end of each month.
Refer to the Thurston Products information above. The total required production of running shoes for the second quarter of 2012 is:
A) 315,000 pairs 
B) 327,750 pairs 
C) 302,250 pairs 
D) 287,250 pairs

Quizplus · Accepted Answer

To calculate the total required production of running shoes, we need to calculate the desired ending inventory for each month and add it to the projected sales for the same month.

- April: Desired ending inventory = 15% of May sales = 18,000 pairs. Total need = 105,000 + 18,000 = 123,000 pairs
- May: Desired ending inventory = 15% of June sales = 22,500 pairs. Total need = 120,000 + 22,500 = 142,500 pairs
- June: Desired ending inventory = 15% of July sales = 20,250 pairs. Total need = 130,000 + 20,250 = 150,250 pairs
- Total required production = 123,000 + 142,500 + 150,250 = 327,750 pairs.

Therefore, the best choice is B) 327,750 pairs.

Thurston Products Thurston Products Sells a Popular Style of Running