Fab Manufacturing Corporation manufactures and sells stainless steel coffee mugs.Expected mug sales at Fab (in units)for the next three months are as follows: Fab likes to maintain a finished goods inventory equal to 30% of the next month's estimated sales.How many mugs should Fab plan on producing during the month of November?

Question

Fab Manufacturing Corporation manufactures and sells stainless steel coffee mugs.Expected mug sales at Fab (in units)for the next three months are as follows:  Fab likes to maintain a finished goods inventory equal to 30% of the next month's estimated sales.How many mugs should Fab plan on producing during the month of November?

Quizplus · Accepted Answer

To calculate the number of mugs Fab should plan on producing during the month of November, we need to first calculate the estimated sales for December (which is mentioned to be 11,500 in the table).

Inventory for December = 30% of 11,500 = 3,450
Total required for December (including inventory) = 11,500 + 3,450 = 14,950

Similarly, inventory for November will be 30% of the estimated sales for December, which is 3,450.

Total required for November (including inventory) = 12,000 + 3,450 = 15,450

Now, we need to subtract the inventory for November (which is 30% of the estimated sales for December) from the total required for November (which includes inventory for both November and December).

Required production for November = 15,450 - 3,450 = 12,000

Therefore, Fab should plan on producing 26,800 mugs during the month of November (Option B).

Fab Manufacturing Corporation Manufactures and Sells Stainless Steel Coffee Mugs