Gorberchev Food Processing expects to have 20,000 units of finished goods inventory on hand on March 31 and reports the following expected sales (in units)for the first four months:
For the budgeting period the company desires each month's finished goods ending inventory to be 20% of the next month's sales.
The budgeted production for finished goods during May should be:

Question

Gorberchev Food Processing expects to have 20,000 units of finished goods inventory on hand on March 31 and reports the following expected sales (in units)for the first four months: 
For the budgeting period the company desires each month's finished goods ending inventory to be 20% of the next month's sales.
The budgeted production for finished goods during May should be:

Quizplus · Accepted Answer

To determine the budgeted production for May, we must first calculate the desired ending inventory for each month.

April's desired ending inventory = 20% of May's expected sales = 0.20 x 140,000 = 28,000 units.
March's ending inventory + April's production - April's sales = April's ending inventory.

20,000 + April's production - 118,000 = 28,000
April's production = 26,000

May's desired ending inventory = 20% of June's expected sales = 0.20 x 150,000 = 30,000 units.
April's ending inventory + May's production - May's sales = May's ending inventory.

28,000 + May's production - 140,000 = 30,000
May's production = 142,000 units.

Therefore, the budgeted production for finished goods during May should be 142,000 units.

Gorberchev Food Processing Expects to Have 20,000 Units of Finished