Suppose Cook Plus manufactures cast iron skillets. One model is a 10-inch skillet that sells for $ 24. Cook Plus projects sales of 675 10-inch skillets per month. The production costs are $ 5 per skillet for direct materials, $ 3 per skillet for direct labor, and $ 6 per skillet for manufacturing overhead. Cook Plus has 60 10-inch skillets in inventory at the beginning of July but wants to have an ending inventory equal to 20 % of the next month's sales. Selling and administrative expenses for this product line are $ 1 comma 600 per month. How many 10-inch skillets should Cook Plus produce in July?

Question

Business

Cristal Flowers

3 August, 09:04

Suppose Cook Plus manufactures cast iron skillets. One model is a 10-inch skillet that sells for $ 24. Cook Plus projects sales of 675 10-inch skillets per month. The production costs are $ 5 per skillet for direct materials, $ 3 per skillet for direct labor, and $ 6 per skillet for manufacturing overhead. Cook Plus has 60 10-inch skillets in inventory at the beginning of July but wants to have an ending inventory equal to 20 % of the next month's sales. Selling and administrative expenses for this product line are $ 1 comma 600 per month. How many 10-inch skillets should Cook Plus produce in July?

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Answers (1)

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Aydin Parsons · Answer 1

Production = 750 units

Explanation:

Giving the following information:

Cook Plus projects sales of 675 10-inch skillets per month.

Cook Plus has 60 10-inch skillets in inventory at the beginning of July but wants to have an ending inventory equal to 20 % of the next month's sales.

TO calculate the production required, we need to use the following formula.

Production = sales + desired ending inventory - beginning inventory

Production = 675 + (0.2*675) - 60

Production = 750 units