Kauf Industries has just completed its sales forecasts and its marketing departm
ID: 2428267 • Letter: K
Question
Kauf Industries has just completed its sales forecasts and its marketing department estimates that the company will sell 36,000 units during the upcoming year. In the past, management has maintained inventories of finished goods at approximately three months' sales. However, the estimated inventory at the start of the year of the budget period is only 6,000 units. Sales occur evenly throughout the year. What is the estimated production level (units) for the first month of the upcoming budget year?a. 12,000
b. 9,000
c. 6,000
Explanation / Answer
c. 6000 As sales are even throughout the year, avge monthly sale = 36000/12 = 3000 units pm Inventory reqd == 3 months sale = 3*3000 = 9000 units Openng inv is 6000 units + 1st maonth sale is 3000 units. Reqd Inv is 9000 Units + 3000 unit as 1st month sale SO prod in 1st month = (9000+3000)-6000 = 6000 units
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