Figure 1
Projected sales for Sommers, Inc., for next year and beginning and ending inventory data are as follows:
The selling price is £40 per unit. Each unit requires four pounds of material which costs £6 per pound. The beginning inventory of raw materials is 12,000 pounds. The company wants to have 3,000 pounds of material in inventory at the end of the year.
-Refer to Figure 1. According to Sommers' production budget, how many units should be produced?

Question

Quizplus · Accepted Answer

To calculate the number of units to be produced, we need to consider the sales forecast and the change in inventory levels. The production budget is calculated as: Units to be produced = Sales forecast + Desired ending inventory - Beginning inventory.Assuming the sales forecast is 50,000 units (as implied by the choices), and given the beginning inventory of raw materials is 12,000 pounds and the desired ending inventory is 3,000 pounds, we calculate the units to be produced as follows:Units to be produced = 50,000 + (3,000/4) - (12,000/4) = 54,000 units.

Figure 1 Projected Sales for Sommers, Inc., for Next Year and Beginning