Offenbach & Son has just made its sales forecasts and its marketing department estimates that the company will sell 232,200 units during the coming year. In the past, management has maintained inventories of finished goods at approximately one month's sales. The inventory at the start of the budget period is 15,600 units. Sales occur evenly throughout the year. Required: Estimate the production level required for the coming year to meet these objectives.

Question

Business

Demarion Baldwin

30 May, 11:48

Offenbach & Son has just made its sales forecasts and its marketing department estimates that the company will sell 232,200 units during the coming year. In the past, management has maintained inventories of finished goods at approximately one month's sales. The inventory at the start of the budget period is 15,600 units. Sales occur evenly throughout the year. Required: Estimate the production level required for the coming year to meet these objectives.

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Amber · Answer 1

Production = 235,950 units

Explanation:

Giving the following information:

Sales = 232,200 units during the coming year.

Desired ending inventory = one month's sales

Beginning inventory = 15,600 units.

First, we need to calculate the desired ending inventory:

Desired ending inventory = 232,200/12 = 19,350

Now, we can determine the production for the year:

Production = sales + desired ending inventory - beginning inventory

Production = 232,200 + 19,350 - 15,600

Production = 235,950 units