Fantastic Futons manufactures futons.The estimated number of futon sales for the first three months of 2014 are as follows: Finished goods inventory at the end of 2013 was 10,000 units.On average,25 percent of the futons to be sold in the next month are produced and kept as ending balance in finished goods inventory.The planned selling price is $150 per unit.
-How many futons are budgeted to be produced in January by Fantastic Futons?

Question

Fantastic Futons manufactures futons.The estimated number of futon sales for the first three months of 2014 are as follows:  Finished goods inventory at the end of 2013 was 10,000 units.On average,25 percent of the futons to be sold in the next month are produced and kept as ending balance in finished goods inventory.The planned selling price is $150 per unit.
-How many futons are budgeted to be produced in January by Fantastic Futons?

Quizplus · Accepted Answer

To find the number of futons to be produced in January, we need to calculate the total number of futons needed to be sold in January plus the ending finished goods inventory for January.

Total futons needed to be sold in January = (25% of February sales) + March sales 
= (25% x 42,500) + 52,500 
= 10,625 + 52,500 
= 63,125

Ending finished goods inventory for January = Total January sales x 25% 
= 63,125 x 25% 
= 15,781.25 
(Rounding up to the nearest whole number gives 15,782)

Total futons to be produced in January = Total January sales + Ending finished goods inventory - Beginning finished goods inventory 
= 63,125 + 15,782 - 10,000 
= 68,907

Therefore, the best choice is C) 42,500.

Fantastic Futons Manufactures Futons