Young Enterprises has budgeted sales in units for the next five months as follow

Question

Young Enterprises has budgeted sales in units for the next five months as follows:
   

     
Past experience has shown that the ending inventory for each month should be equal to 20% of the next month's sales in units. The inventory on May 31 fell short of this goal since it contained only 950 units. The company needs to prepare a Production Budget for the next five months.

The total number of units to be produced in July is:

  June 4,900 units   July 7,500 units   August 5,700 units   September 7,100 units   October 4,100 units

Explanation / Answer

Number of units produced = July sales + Ending inventory desired - Beginning inventory

                                     = 7500 + (5700 *.20 ) - (7500 *.20)

                                     = 7500 + 1140 - 1500

                                    = 7140 units

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