Bambino Sporting Goods makes baseball gloves that are very popular in the spring

Question

Bambino Sporting Goods makes baseball gloves that are very popular in the spring and early summer season. Units sold are anticipated as follows:

If seasonal production is used, it is assumed that inventory will directly match sales for each month and there will be no inventory buildup.

  
The production manager thinks the preceding assumption is too optimistic and decides to go with level production to avoid being out of merchandise. He will produce the 33,900 units over four months at a level of 8,475 per month.

a. What is the ending inventory at the end of each month? Compare the unit sales to the units produced and keep a running total.
  

Bambino Sporting Goods makes baseball gloves that are very popular in the spring and early summer season. Units sold are anticipated as follows:

If seasonal production is used, it is assumed that inventory will directly match sales for each month and there will be no inventory buildup.

  
The production manager thinks the preceding assumption is too optimistic and decides to go with level production to avoid being out of merchandise. He will produce the 33,900 units over four months at a level of 8,475 per month.

a. What is the ending inventory at the end of each month? Compare the unit sales to the units produced and keep a running total.
March units

April units

May units

June units

b. If the inventory costs $12 per unit and will be financed at the bank at a cost of 12 percent, what is the monthly financing cost and the total for the four months? (Use 1.0 percent as the monthly rate.)
  

  

Monthly Unit Sales March 3,650 April 7,650 May 12,300 June 10,300 33,900 Total units sold

Explanation / Answer

Question - a

(1) Production column is filled as 8475, 8475 + 8475 = 16950, then 16950 + 8475 = 25425 and finally 25425 + 8475 = 33900.

(2) Sale column is also running total of given sales in units.

(3) Inventory = Production running total - sales running total

Question - b

For value in dollars, just multiply the inventory in units with $ 12 per unit.

For ending inventory of march, FC ( Financing cost ) is shown in April @ 1% per month.

In the same way FC of 67800 * 0.01 = 678 of April is charged in May.

Month Production Sales Inventory March 8475 3650 4825 April 16950 11300 5650 May 25425 23600 1825 June 33900 33900 0

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