Kaufman Industries has just completed its sales forecasts and its marketing depa
ID: 2477067 • Letter: K
Question
Kaufman Industries has just completed its sales forecasts and its marketing department estimates that the company will sell 28,800 units during the upcoming year. In the past, management has maintained inventories of finished goods at approximately 9 months' sales. However, the estimated inventory at the start of the year of the budget period is only 13,000 units. Sales occur evenly throughout the year. What is the estimated production level (units) for the first month of the upcoming budget year
Explanation / Answer
Solution:
Estimated sales for next year = 28,800 units
Opening inventory = 13,000 units
Inventory to be maintained as per company's rules = 28,800 * 9 / 12 = 21,600 units
Inventory falling short in the opening month = 21,600 units - 13,000 units = 8,600 units
If sales occur evenly throughout the year then sales per month will be approximately = 28,800 units / 12months
= 2,400 units
Estimated production for the first month will be 8,600 units.
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