A company produces doors. The following information wasgathered to prepare budge

Question

A company produces doors. The following information wasgathered to prepare budgets for the upcoming year beginning January1:

sales forecast inunits................................... 5,500 doors

finished goods inventory,Jan1.......................   620 doors

target finished goods inventory,Dec1.............  480 doors

raw materials inventory-steel, Jan1................ 40,000lbs

targetinventory-steel,Dec1..........................   80,000lbs

raw materialsinventory-glass,Jan1..................   6,000 squarefeet

targetinventory-glass,Dec1............................   4,000square feet

budgeted purchase price-steel......................... $4 perlb

budgeted purchase price-glass.........................$2 persquare foot

The manufacture of each door requires 20 lbs of steel and 6square feet of glass
** why might this company's target level of steel inventory behigher than last year's ending balance and its target level ofglass inventory be lower than last year's ending balance? A company produces doors. The following information wasgathered to prepare budgets for the upcoming year beginning January1: sales forecast inunits................................... 5,500 doors finished goods inventory,Jan1.......................   620 doors target finished goods inventory,Dec1.............  480 doors raw materials inventory-steel, Jan1................ 40,000lbs targetinventory-steel,Dec1..........................   80,000lbs raw materialsinventory-glass,Jan1..................   6,000 squarefeet targetinventory-glass,Dec1............................   4,000square feet budgeted purchase price-steel......................... $4 perlb budgeted purchase price-glass.........................$2 persquare foot The manufacture of each door requires 20 lbs of steel and 6square feet of glass
** why might this company's target level of steel inventory behigher than last year's ending balance and its target level ofglass inventory be lower than last year's ending balance?

Explanation / Answer

Why might this company's target level of steelinventory be higher than last year’s ending balance andits
target level of glass inventory be lower than last year’sending balance? ================================================================================ 1) There might be a change in design requiring moresteel materials and less glass materials 2) There migh be anticipated a price rise in the procurementprice of steel materials and glass materials remain at the sameprice. 3) new entrants of glass manufacturer into the market offeringcompetitive price and delivery schedule

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