Reference: 07-09
Noel Enterprises has budgeted sales in units for the next five months as follows: $$\begin{array} { | l | l | }
\hline \text { January } & 6,800 \text { units } \
\hline \text { February } & 5,400 \text { units } \
\hline \text { March } & 7,200 \text { units } \
\hline \text { April } & 4,600 \text { units } \
\hline \text { May } & 3,800 \text { units } \
\hline
\end{array}$$ Past experience has shown that the ending inventory for each month must be equal to 10% of the next month's sales in units. The inventory on December 31 contained 400 units. The company needs to prepare a production budget for the second quarter of the year.
-The total number of units to be produced in February is:

Question

Reference: 07-09
Noel Enterprises has budgeted sales in units for the next five months as follows: $$\begin{array} { | l | l | } 
\hline \text { January } & 6,800 \text { units } \
\hline \text { February } & 5,400 \text { units } \
\hline \text { March } & 7,200 \text { units } \
\hline \text { April } & 4,600 \text { units } \
\hline \text { May } & 3,800 \text { units } \
\hline
\end{array}$$ Past experience has shown that the ending inventory for each month must be equal to 10% of the next month's sales in units. The inventory on December 31 contained 400 units. The company needs to prepare a production budget for the second quarter of the year.
-The total number of units to be produced in February is:

Quizplus · Accepted Answer

To calculate the total units to be produced in February, we need to consider the sales forecast for February, the desired ending inventory for February (which is 10% of March's sales), and the beginning inventory for February (which is the ending inventory of January). February's sales are forecasted to be 5,400 units. The desired ending inventory for February is 10% of March's sales, which is 10% of 7,200 units = 720 units. The beginning inventory for February is the ending inventory of January, which is 10% of February's sales (10% of 5,400 units = 540 units).The total units to be produced in February = February's sales + February's desired ending inventory - February's beginning inventory = 5,400 units + 720 units - 540 units = 5,580 units.

Reference: 07-09 Noel Enterprises Has Budgeted Sales in Units for the Next

Reference: 07-09
Noel Enterprises Has Budgeted Sales in Units for the Next