Noel Enterprises has budgeted sales in units for the next five months as follows:
$\begin{array} {| l | r |}
\hline \text { January } & 6,800 \text { units } \
\hline \text { February } & 5,400 \text { units } \
\hline \text { March } & 7,200 \text { units } \
\hline \text { April } & 4,600 \text { units } \
\hline \text { May } & 3,800 \text { units } \
\hline
\end{array}$Past experience has shown that the ending inventory for each month must be equal to 10% of the next month's sales in units. The inventory on December 31 contained 400 units. The company needs to prepare a production budget for the second quarter of the year.

-What is the total number of units to be produced in February?

Question

Noel Enterprises has budgeted sales in units for the next five months as follows:
$\begin{array} {| l | r |} 
\hline \text { January } & 6,800 \text { units } \
\hline \text { February } & 5,400 \text { units } \
\hline \text { March } & 7,200 \text { units } \
\hline \text { April } & 4,600 \text { units } \
\hline \text { May } & 3,800 \text { units } \
\hline
\end{array}$Past experience has shown that the ending inventory for each month must be equal to 10% of the next month's sales in units. The inventory on December 31 contained 400 units. The company needs to prepare a production budget for the second quarter of the year.

-What is the total number of units to be produced in February?

Quizplus · Accepted Answer

To calculate the total number of units to be produced in February, we need to consider the sales forecast for February, the desired ending inventory for February (which is 10% of March's sales), and the beginning inventory for February (which is the ending inventory of January). February's sales are forecasted to be 5,400 units. The desired ending inventory for February is 10% of March's sales, which is 10% of 7,200 units = 720 units. The beginning inventory for February is the ending inventory of January, which is 10% of February's sales (10% of 5,400 units = 540 units).The total units to be produced in February = February's sales + Desired ending inventory for February - Beginning inventory for February = 5,400 units + 720 units - 540 units = 5,580 units.

Noel Enterprises Has Budgeted Sales in Units for the Next