Kaufman Industries has just completed its sales forecasts and its marketing depa

Question

Kaufman Industries has just completed its sales forecasts and its marketing department estimates that the company will sell 32,400 units during the upcoming year. In the past, management has maintained inventories of finished goods at approximately 6 months' sales. However, the estimated inventory at the start of the year of the budget period is only 11,000 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

Sales 32400 Units Inventories maintained 6 months sales Opening Inventory 11000units Production level for 1st month Sales in each month 32400/12 2700 Sales in 6 month 2700*6 16200 Opening = 11000 Sales= 2700 Balance = 11000-2700 8300 Inventory at first month 16200 Production = 16200-8300 7900 Production in first month is 7900 units

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