Varney Company makes rolling suitcases. Its sales budget for four months is: Sal
ID: 2521601 • Letter: V
Question
Varney Company makes rolling suitcases. Its sales budget for four months is:
Sales
Month
R
March 15,000
April 20,000
May 40,000
June 60,000
Varney's policy is that ending inventory of finished suitcases should equal 30% of the next
month's sales. Beginning inventory (March 1) is 5,300 suitcases.
Each suitcase required 1.5 meters of ballistic nylon. The ending inventory policy for nylon is
that 20% of the following month's production needs must be on hand. On March 1, Varney
had 10,450 meters of nylon in inventory.
Required:
3.1 What is the desired ending inventory of suitcases for April? (1)
3.2 What is the budgeted production of suitcases for April? (1)
3.3 What is the desired ending inventory of nylon for March? (1)
3.4 What are the budgeted meters of nylon to be purchased in March? (1)
3.5 Assuming each suitcase required two meters of ballistic nylon, what is the desired ending
inventory of nylon for March? (1)
Explanation / Answer
A. 12,000 (see table below) B. 26,000 (see table below) March April May Sales 15000 20000 40000 Add: Desired EI 6000 12000 18000 Units needed 21000 32000 58000 Less: - Beginning inventory 5300 6000 12000 Production 15700 26000 46000 C. 7,800 metres (26,000 x 1.5 x 20%) D. 20,900 metres (see table below) March April Production 15,700 26,000 x 1.5 m 1.5 1.5 Nylon needed for production 23,550 39,000 Add: Desired ending inventory Nylon needed 7,800 Nylon needed 31,350 Less: Beginning inventory 10,450 Purchases of nylon in metres 20,900 E. 10,400 metres (26,000 x 2 x 20%)
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