Asian Lamp Company manufactures lamps. The estimated number of lamp sales for the last three months for the current year are as follows: $$\begin{array} { l r }
\text { Month } & \text { Sales } \
\text { October } & 10,000 \
\text { November } & 14,000 \
\text { December } & 13,000
\end{array}$$ Finished goods inventory at the end of September was 3,000 units. Ending finished goods inventory is budgeted to equal 25 percent of the next month's sales. Asian Lamp expects to sell the lamps for $25 each. January sales is projected at 16,000 lamps.
How many lamps should be produced in November?
A)11,000 lamps
B)10,500 lamps
C)14,000 lamps
D)13,750 lamps

Question

Asian Lamp Company manufactures lamps. The estimated number of lamp sales for the last three months for the current year are as follows: $$\begin{array} { l r } 
\text { Month } & \text { Sales } \
\text { October } & 10,000 \
\text { November } & 14,000 \
\text { December } & 13,000
\end{array}$$ Finished goods inventory at the end of September was 3,000 units. Ending finished goods inventory is budgeted to equal 25 percent of the next month's sales. Asian Lamp expects to sell the lamps for $25 each. January sales is projected at 16,000 lamps.
How many lamps should be produced in November?
A)11,000 lamps
B)10,500 lamps
C)14,000 lamps
D)13,750 lamps

Quizplus · Accepted Answer

To calculate the production for November, we need to consider the sales forecast for November, the desired ending inventory for November (which is 25% of December's sales), and the beginning inventory for November (which is the ending inventory of October). November sales are projected to be 14,000 lamps. The desired ending inventory for November is 25% of December's sales, which is 25% of 13,000 = 3,250 lamps. The beginning inventory for November is the ending inventory of October, which is 25% of November's sales, 25% of 14,000 = 3,500 lamps.The production needed for November is calculated as follows: $$ \text{November Sales} + \text{Desired Ending Inventory for November} - \text{Beginning Inventory for November} $$$$ 14,000 + 3,250 - 3,500 = 13,750 $$Therefore, 13,750 lamps should be produced in November.

Asian Lamp Company Manufactures Lamps Finished Goods Inventory at the End of September Was 3,000