Question & Answer: Hospitable Co. provides the following sales forecast for the next four months: The company wants to end each month with ending finishe…..

Hospitable Co. provides the following sales forecast for the next four months: April Sales (units 640 720 670 670 JunelJu The company wants to end each month with ending finished goods inventory equal to 20% of next months sales. Finished goods inventory on April 1 is 128 units. Assume Julys budgeted production is 680 units. Prepare a production budget for the months of April, May and June. HOSPITABLE CO. Production Budget For April, May, and June April May June Next months budgeted sales (units) Ratio of inventory to future sales 720 20% 670 670 Required units of available production Units to be produced

Hospitable Co. provides the following sales forecast for the next four months: The company wants to end each month with ending finished goods inventory equal to 20% of next month’s sales. Finished goods inventory on April 1 is 128 units. Assume July’s budgeted production is 680 units. Prepare a production budget for the months of April, May and June.

Expert Answer

 

HOSPITABLE COMPANY
Production Budget
For April, May and June
April May June
Next Month’s Budgeted Sales(Units) a 720 670 670
Ratio of Inventory to Future Sales b 20% 20% 20%
Required Units of Ending Inventory c=a*b 144 134 134
Sales (Units) d 640 720 670
Required Units of available production e=c+d 784 854 804
Avaialble Beginning Inventory f 128 144 134
Units to be produced e-f 656 710 670
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