The Cardinal Company had a finished goods inventory of 55,000 units on January 1. Its projected sales for the next four months were: January - 200,000 units; February - 180,000 units; March - 210,000 units; and April - 230,000 units. The Cardinal Company wishes to maintain a desired ending finished goods inventory of 20% of the following months sales.
What is the budgeted units of production for February?

Question

Quizplus · Accepted Answer

To calculate the budgeted units of production for February, we need to consider the sales for February, the desired ending inventory for February, and the beginning inventory for February. The desired ending inventory for February is 20% of March's sales, which is 42,000 units (20% of 210,000). The beginning inventory for February is the ending inventory from January, which is 36,000 units (20% of February's sales, 180,000). The formula is: Production = Sales + Ending Inventory - Beginning Inventory. So, Production = 180,000 + 42,000 - 36,000 = 186,000 units.

The Cardinal Company Had a Finished Goods Inventory of 55,000