Cecil Chair Company maunfactures rocking chairs. The estimated number of rocking

Question

Cecil Chair Company maunfactures rocking chairs. The estimated number of rocking chair sales for each of the last three months of Year 1 is as follows:

MONTH UNIT SALES

October 10,000

November 14,000

December 13,000

Finished goods inventory at the end of November was 3,000 units. Desried ending finished goods inventory is equal to 25 percent of the next three month's sales. Cecil chair expects to sell the chairs for $100 each. January sales for Year 2 are projected at 16,000 chairs. How many chairs should Cecil produce in December?

A) 10,000

B) 14,000

C) 9,500

D) 10,500

Explanation / Answer

Production in December (Nos. in units - no. of chairs) Opening FG Inventory as on 1 December 3000 Closing Inventory (based on Jan sales) Sales for January = 16000 chairs Closing Inventory @ 25% of this amount 4000 Sales for December 13000 Hence, production for December = Closing Inventory + Sales - Opening Inventory Thus, the production in December will be 14000 chairs, which is Option B

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