Ace Company has 200 units of a given product on hand at the beginning of April.

Question

Ace Company has 200 units of a given product on hand at the beginning of April. One unit of the product costs $6 to manufacture. The company has the following sales budget: Month Sales units April 1,000 May 1,500 June 1,800 The company’s policy is that it will maintain an ending Finished Good Inventory (in units) to be same as 30% of the following month’s sales units. Based on the information above, the balance sheet at the end of April will show a $_________ balance for Finished Good (product).

Explanation / Answer

The balance sheet at the end of April will show a $ 2,700 balance for Finished Good (product) shown as under:

Particulars Units Cost per unit Total Cost Beginning of April Opening units (a) 200 $6 1200 Given in question April Sales (b) 1,000 $6 6,000 Given in question Closing units (c ) 450 $6 2700 30% of May sales Units purchased b+c-a 1,250 $6 7500 Calculated May Sales (b) 1,500 $6

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