Jared Inc. produces leather handbags. The sales budget for the next four months

Question

Jared Inc. produces leather handbags. The sales budget for the next four months is: July 5,500 units, August 7,300, September 8,100, October 8,600. Each handbag requires 0.5 square meters of leather. Jared Inc.’s finished goods inventory policy is 10% of next month’s sales needs. Jared Inc.’s leather inventory policy is 20% of next month’s production needs. What will leather purchases be in August? (Do not round intermediate calculations. Round your final answer to the nearest whole number.)

3,767 square meters

3,592 square meters

3,675 square meters

3,617 square meters

Explanation / Answer

Production budget :

August purchase = 7380*.50+(8150*20%*0.50)-(7380*.50*20%) = 3767 Square meters

so answer is a) 3,767 square meters

August September Sales 7300 8100 Add: Desired ending inventory 810 860 Total needs 8110 8960 Less: Beginning inventory (730) (810) Production units 7380 8150

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