-Antonio Banderos & Scarves makes headwear that is very popular in the fall-wint
ID: 2816955 • Letter: #
Question
-Antonio Banderos & Scarves makes headwear that is very popular in the fall-winter season. Units sold are anticipated as:
Monthly Unit Sales
October 2,200
November 3,200
December 6,400
January 5,400
17,200 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.
However, Antonio decides to go with level production to avoid being out of merchandise. He will produce the 17,200 items over four months at a level of 4,300 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.
-October___ units
-November___units
-December___units
-January___units
b. If the inventory costs $6 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 percent as the monthly rate.)
-October
-November
-December
-January
-Total Financing cost
Explanation / Answer
Month
Units in beginning month inventory
Unit produced
Units sold
Units in month end inventory = units in beginning inventory + units produced - unnits sold
October
0
4300
2200
2100
November
2100
4300
3200
3200
December
3200
4300
6400
1100
January
1100
4300
5400
0
2-
Month
Units in month end inventory = units in beginning inventory + units produced - units sold
Monetary value of inventory = units in inventory* unit cost
Financing cost = monetary value of inventory*financing cost
October
2100
12600
126
November
3200
19200
192
December
1100
6600
66
January total financing cost
0
0
0
384
Month
Units in beginning month inventory
Unit produced
Units sold
Units in month end inventory = units in beginning inventory + units produced - unnits sold
October
0
4300
2200
2100
November
2100
4300
3200
3200
December
3200
4300
6400
1100
January
1100
4300
5400
0
2-
Month
Units in month end inventory = units in beginning inventory + units produced - units sold
Monetary value of inventory = units in inventory* unit cost
Financing cost = monetary value of inventory*financing cost
October
2100
12600
126
November
3200
19200
192
December
1100
6600
66
January total financing cost
0
0
0
384
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