Krier Industries has just completed its sales forecasts and its marketing depart

Question

Krier Industries has just completed its sales forecasts and its marketing department estimates that the company will sell 40,800 units during the upcoming year. In the past, management has maintained inventories of finished goods at approximately 3 months' sales. However, the estimated inventory at the start of the year of the budget period is only 6,800 units. Sales occur evenly throughout the year. What is the estimated production level (units) for the first month of the upcoming budget year?

13,600.

10,200.

6,800.

3,400.

Explanation / Answer

Sales Forcasted for the year = 40800 Units Per month Sales = (40,800 Units / 12 Months)= 3400 Units Inventiry maintained = (3 months Sales) 10200 Units Estimated Production = Budgeted Sales of the one month + Closing Stock - Opening Stock Estimated Production = 3400 Units + 10,200 Units - 6800 Units Estimated Production = 6,800 Units Answer = Option 3 = 6,800 Units

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