Bambino Sporting Goods makes baseball gloves that are very popular in the spring
ID: 2808712 • Letter: B
Question
Bambino Sporting Goods makes baseball gloves that are very popular in the spring and early summer season. Units sold are anticipated as follows: Monthly Unit Sales March 4,250 April 8,250 May 13,500 June 11,500 37,500 Total units sold If seasonal production is used, it is assumed that inventory will directly match sales for each month and there will be no inventory buildup. The production manager thinks the preceding assumption is too optimistic and decides to go with level production to avoid being out of merchandise. He will produce the 37,500 units over four months at a level of 9,375 per month.
a. What is the ending inventory at the end of each month? Compare the unit sales to the units produced and keep a running total.
Ending Inventory
March = units
April= units
May= units
June= units
b. If the inventory costs $12 per unit and will be financed at the bank at a cost of 12 percent, what is the monthly financing cost and the total for the four months? (Use 1.0 percent as the monthly rate.)
Inventory Financing Cost
March=
April=
May=
June=
Total Financing Cost=
Explanation / Answer
a) Ending Inventory = Beginning Inventory + Units Produced-Sales
Example
For March = 9375-4250 = 5125
For April = 5125+9375-8250 = 6250
b) Inventory cost = $12*Ending Inventory
Financing Cost = 0.01*Inventory Cost
For March = 12* 5125 = 61500 = Inventory Cost
Financing Cost = 0.01*61500 = $615
Adding for all months
Total Financing cost = $1620 (refer the table below)
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