Ruiz Co. provides the following sales forecast for the next four months: The com
ID: 2514402 • Letter: R
Question
Ruiz Co. provides the following sales forecast for the next four months:
The company wants to end each month with ending finished goods inventory equal to 30% of next month's forecasted sales. Finished goods inventory on April 1 is 204 units. Assume July's budgeted production is 710 units. In addition, each finished unit requires six pounds (lbs.) of raw materials and the company wants to end each month with raw materials inventory equal to 40% of next month’s production needs. Beginning raw materials inventory for April was 1,690 pounds. Assume direct materials cost $5 per pound.
Prepare a production budget for the months of April, May, and June.
April May June July Sales (units) 680 760 710 800
Explanation / Answer
April May June Next month's budgeted sales (units) 760 710 800 Ratio of inventory to future sales 30% 30% 30% Budgeted ending inventory (units) 228 213 240 Budgeted unit sales for month 680 760 710 Required units of available production 908 973 950 Budgeted beginning inventory (units) -204 -228 -213 Units to be produced 704 745 737
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