Suppose Iron Handles manufactures cast iron skillets. One model is a? 10-inch sk

Question

Suppose Iron Handles manufactures cast iron skillets. One model is a? 10-inch skillet that sells for $26. Iron Handles projects sales of 600 ?10-inch skillets per month. The production costs are $10 per skillet for direct? materials, $2 per skillet for direct? labor, and $5 per skillet for manufacturing overhead. Iron Handles has 25 10-inch skillets in inventory at the beginning of July but wants to have an ending inventory equal to 25?% of the next? month's sales. Selling and administrative expenses for this product line are $1,800 per month.How many? 10-inch skillets should Iron Handles produce in? July?

A. 775 skillets

B. 600 skillets

C. 725 skillets

D. 750 skillets

Explanation / Answer

Answer:

Skillets to be produced in? July =725 units

Working notes for the above answer is as under:

Particular

Units

Sales of the month

600

Add:

Desired ending inventory of July
=25%*600

150

Less: Beginning inventory

25

skillets to be produced

725

Particular

Units

Sales of the month

600

Add:

Desired ending inventory of July
=25%*600

150

Less: Beginning inventory

25

skillets to be produced

725

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