Barkin Company budgeted the following sales in units: April 50,000
May 20,000
June 40,000
The company's policy is to have 20% of the following month's sales in finished goods inventory. On April 1, finished goods inventory equalled 10,000 units. What is May's production in units?

Question

Quizplus · Accepted Answer

To determine May's production, we need to first calculate the desired ending finished goods inventory for May.

May's sales = 20,000 
20% of June's sales = 0.20 x 40,000 = 8,000 
Desired ending finished goods inventory for May = May's sales + 20% of June's sales - April's finished goods inventory = 20,000 + 8,000 - 10,000 = 18,000

Next, we need to calculate the required production to achieve this desired ending inventory:

Required production = Desired ending finished goods inventory - Beginning finished goods inventory = 18,000 - 10,000 = 8,000

Finally, we need to add May's sales to the required production to determine May's total production:

May's production = May's sales + Required production = 20,000 + 8,000 = 24,000

Therefore, the correct answer is B) 24,000.

Barkin Company Budgeted the Following Sales in Units: April 50,000