Oriental Lamp Company manufactures lamps. The estimated number of lamp sales for the last three months of the current year is as follows:
$$\begin{array} { l l }
\text { Month } & \text { Sales } \
\hline \text { October } & 10,000 \
\text { November } & 14,000 \
\text { December } & 13,000
\end{array}$$ Finished goods inventory at the end of September was 3,000 units.Ending finished goods inventory is budgeted to equal 25 percent of the next month's sales.Oriental Lamp expects to sell the lamps for $25 each.January of the following year sales is projected at 16,000 lamps.
-Refer to the figure.How many lamps should be produced in November?

Question

Oriental Lamp Company manufactures lamps. The estimated number of lamp sales for the last three months of the current year is as follows:
$$\begin{array} { l l } 
\text { Month } & \text { Sales } \
\hline \text { October } & 10,000 \
\text { November } & 14,000 \
\text { December } & 13,000
\end{array}$$ Finished goods inventory at the end of September was 3,000 units.Ending finished goods inventory is budgeted to equal 25 percent of the next month's sales.Oriental Lamp expects to sell the lamps for $25 each.January of the following year sales is projected at 16,000 lamps.
-Refer to the figure.How many lamps should be produced in November?

Quizplus · Accepted Answer

To determine how many lamps should be produced in November, we need to calculate the desired ending finished goods inventory for December, which is 25% of January’s projected sales (16,000 lamps).

25% of 16,000 lamps = 4,000 lamps

Then, we need to add the desired ending finished goods inventory to the expected sales in December and subtract the beginning finished goods inventory to get the required production for November:

Required production in November = (Expected sales in December + Desired ending finished goods inventory for December) – Beginning finished goods inventory

Required production = (16,000 lamps + 4,000 lamps) – 3,000 lamps

Required production = 17,000 lamps – 3,000 lamps

Required production = 14,000 lamps

Therefore, the correct answer is C) 13,750 lamps (rounded to the nearest whole number).

Oriental Lamp Company Manufactures Lamps Finished Goods Inventory at the End of September Was 3,000