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 October?

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 October?

Quizplus · Accepted Answer

To calculate how many lamps should be produced in October, we need to use the following formula:

Projected sales + Ending finished goods inventory - Beginning finished goods inventory = Production needs

First, we need to calculate the ending finished goods inventory for October:

25% of projected sales for November = 25% x 16,000 lamps = 4,000 lamps

Next, we can use the formula to calculate production needs:

16,000 lamps (projected sales for January) + 4,000 lamps (ending finished goods inventory for October) - 3,000 lamps (ending finished goods inventory for September) = 17,000 lamps

Therefore, Oriental Lamp should produce 10,500 lamps in October (17,000 lamps – 4,000 lamps = 10,500 lamps). The correct answer is C.

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