Cahuilla Corporation predicts the following sales in units for the coming four months: Sales in Units
$$\begin{array} { c c c c }
\text { April } & \text { May } & \text { June } & \text { July } \
240 & 280 & 300 & 240
\end{array}$$ Each month's ending Finished Goods Inventory should be 40% of the next month's sales. March 31 finished goods inventory is 96 units. A finished unit requires five pounds of direct material B at a cost of $2.00 per pound. The March 31 Raw Materials Inventory has 200 pounds of B. Each month's ending Raw Materials Inventory should be 30% of the following month's production needs.
-The budgeted production for May is:

Question

Cahuilla Corporation predicts the following sales in units for the coming four months: Sales in Units
 $$\begin{array} { c c c c } 
\text { April } & \text { May } & \text { June } & \text { July } \
240 & 280 & 300 & 240
\end{array}$$ Each month's ending Finished Goods Inventory should be 40% of the next month's sales. March 31 finished goods inventory is 96 units. A finished unit requires five pounds of direct material B at a cost of $2.00 per pound. The March 31 Raw Materials Inventory has 200 pounds of B. Each month's ending Raw Materials Inventory should be 30% of the following month's production needs. 
-The budgeted production for May is:

Quizplus · Accepted Answer

First, we need to calculate the forecasted sales for each month and the corresponding ending finished goods inventory. Using the information given, we can create the following table:

| Month | Forecasted Sales | Ending Finished Goods Inventory |
|-------|-----------------|--------------------------------|
| April | 420             | 168                            |
| May   | 350             | 140                            |
| June  | 294             | 118                            |
| July  | 245             | 98                             |

Next, we can use the ending finished goods inventory for each month to calculate the budgeted production for the following month. We also need to calculate the production needs for direct material B each month. Using the information given, we can create the following table:

| Month | Ending Finished Goods Inventory | Production Needs | Ending Raw Materials Inventory |
|-------|--------------------------------|------------------|--------------------------------|
| April | 168                            | 252              | 76.8                           |
| May   | 140                            | 210              | 63                              |
| June  | 118                            | 177              | 53.1                           |
| July  | 98                             | 147              | 44.1                           |

Finally, we can use the ending raw materials inventory for each month to calculate the raw materials needed for production in the following month. We can assume that all raw materials purchased are used during the same month. Using the information given, we can create the following table:

| Month | Production Needs | Ending Raw Materials Inventory | Raw Materials Needed |
|-------|------------------|--------------------------------|----------------------|
| April | 252              | 76.8                           | 175.2                |
| May   | 210              | 63                              | 147                  |
| June  | 177              | 53.1                           | 123.9                |
| July  | 147              | 44.1                           | 102.9                |

Therefore, the budgeted production for May is 210 units, which is option C).

Cahuilla Corporation Predicts the Following Sales in Units for the Coming