Feedee Company has budgeted sales and production (in units) over the next three months as follows: $$\begin{array} { l c c c }
& \text { January } & \text { February } & \text { March } \
\text { Sales } & 50,000 & ? & 80,000 \
\text { Froduction } & 52,000 & 64,000 & 78,000
\end{array}$$ There are 10,000 units on hand on January 1. A minimum of 20 per cent of the next month's sales in units must be on hand at the end of each month. April sales are expected to be 70,000. Budgeted sales for February would be
A)64,000.
B)78,000.
C)60,000.
D)52,000.

Question

Feedee Company has budgeted sales and production (in units) over the next three months as follows: $$\begin{array} { l c c c } 
& \text { January } & \text { February } & \text { March } \
\text { Sales } & 50,000 & ? & 80,000 \
\text { Froduction } & 52,000 & 64,000 & 78,000
\end{array}$$ There are 10,000 units on hand on January 1. A minimum of 20 per cent of the next month's sales in units must be on hand at the end of each month. April sales are expected to be 70,000. Budgeted sales for February would be
A)64,000.
B)78,000.
C)60,000.
D)52,000.

Quizplus · Accepted Answer

To find the budgeted sales for February, we need to consider the inventory requirements and the production and sales data provided. 1. **January Ending Inventory Requirement:** 20% of February's sales (since February's sales are unknown, we'll call this X). So, the requirement is 0.20X.2. **January Starting Inventory:** 10,000 units + January Production (52,000 units) - January Sales (50,000 units) = 12,000 units available at the end of January.3. **February Ending Inventory Requirement:** 20% of March's sales = 20% of 80,000 = 16,000 units.4. **February's Starting Inventory:** This is January's ending inventory, which we calculated as 12,000 units.5. **February's Production:** 64,000 units.Given this, the total units available in February = February's starting inventory (12,000 units) + February's production (64,000 units) = 76,000 units.To meet March's beginning inventory requirement (February's ending inventory), we need 16,000 units, meaning the units available for February's sales = 76,000 units - 16,000 units = 60,000 units.Therefore, February's sales must be 60,000 units to meet the inventory requirements and production capabilities.

Feedee Company Has Budgeted Sales and Production (In Units) Over