Avery Picture Frames, Inc. is preparing its master budget for the 3 rd quarter e
ID: 2603078 • Letter: A
Question
Avery Picture Frames, Inc. is preparing its master budget for the 3rd quarter ending June 30. The following sales units were forecasted for this 3rd quarter. In addition to the budgets sales in units for these months, the forecasted sales in units for July were 55,000 units.
April
May
June
Sales in units
62,000
59,000
60,000
The company wants to end each month with ending finished goods inventory equal to 20% of next month’s forecasted sales in units. Ending inventory from March is 17,800 units.
Prepare the production budget for April, May and June. Round each units up to the nearest whole unit (no decimals).
April
May
June
Sales in units
62,000
59,000
60,000
Explanation / Answer
Solution:
Month end finished goods requirements for next month = 20%
April forecast = 62000
Required March ending inventory = 17800 (which is above required 12400 units)
May forecast = 59000
Required April ending inventory = 11800
June forecast = 60000
Required may ending inventory = 12000
July forecast = 55000
Required June ending inventory = 11000
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