Harden, Incorporated, has budgeted sales in units for the next five months as follows: Past experience has shown that the ending inventory for each month should be equal to 15% of the next month's sales in units. The inventory on May 31 contained 1,050 units. The company needs to prepare a production budget for the next five months.The beginning inventory for September should be:

Question

Harden, Incorporated, has budgeted sales in units for the next five months as follows:  Past experience has shown that the ending inventory for each month should be equal to 15% of the next month's sales in units. The inventory on May 31 contained 1,050 units. The company needs to prepare a production budget for the next five months.The beginning inventory for September should be:

Quizplus · Accepted Answer

To prepare the production budget, we need to calculate the required production for each month by considering the sales, ending inventory, and beginning inventory.

Step 1: Calculate the required ending inventory for each month by multiplying the next month's sales by 15%.

Step 2: Calculate the required production for each month by adding the required ending inventory to the budgeted sales and subtracting the beginning inventory.

Using this method, we can prepare the following production budget:

| Month | July | August | September | October | November |
|-------|------|--------|-----------|---------|----------|
| Sales | 6,000 | 7,000  | 8,000     | 9,000  | 10,000   |
| Ending Inventory | 1,050 | 1,050  | 1,200     | 1,350  | 1,500   |
| Required Production | 4,950 | 5,900  | 6,800     | 7,800  | 8,550   |
| Beginning Inventory | 1,050 | 1,140  | 1,020     | 1,230  | 1,350   |

Therefore, the beginning inventory for September should be 1,020 units (Choice A).

Harden, Incorporated, Has Budgeted Sales in Units for the Next