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 February 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 February by Fantastic Futons?

Quizplus · Accepted Answer

First, we need to calculate the total estimated futon sales for the first 3 months, which is 172,500 (60,000 + 70,000 + 42,500). 
Then, we need to calculate the total units needed to be produced in the first 3 months, which is 172,500 x 0.75 = 129,375. 
Since the finished goods inventory at the end of 2013 was 10,000 units, we subtract it from the total units needed to be produced and get 119,375 (129,375 - 10,000). 
To find out how many futons should be produced in February, we need to subtract the estimated sales for January (60,000 x 0.75 = 45,000) from the ending balance of finished goods inventory for January (119,375 x 0.25 = 29,844) and get 89,531 (119,375 - 45,000 - 29,844). This means Fantastic Futons needs to produce 89,531 futons in February.

Fantastic Futons Manufactures Futons