The Cardinal Company had a finished goods inventory of 55,000 units on January 1. Its projected sales for the next four months were: January - 200,000 units; February - 180,000 units; March - 210,000 units; and April - 230,000 units. The Cardinal Company wishes to maintain a desired ending finished goods inventory of 20% of the following months sales. What would be the budgeted production for March?

Question

Quizplus · Accepted Answer

To calculate the budgeted production for March, we need to first calculate the desired ending finished goods inventory for March.

Desired ending finished goods inventory for March = 20% of March sales = 20% of 210,000 = 42,000

Now, we can calculate the total units that need to be produced from January to March to meet the sales and inventory targets:

Total units needed from Jan to March = Jan sales + Feb sales + Mar sales + desired ending finished goods inventory for March - beginning finished goods inventory

= 200,000 + 180,000 + 210,000 + 42,000 - 55,000

= 577,000

Therefore, the budgeted production for March would be:

Budgeted production for March = Total units needed from Jan to March - Total units produced in Jan and Feb

= 577,000 - (200,000 + 180,000)

= 197,000

So, the closest option to 197,000 in the answer choices is C) 214,000, and it is the best choice.

The Cardinal Company Had a Finished Goods Inventory of 55,000