Antonio Banderos & Scarves makes headwear that is very popular in the fall-winte

Question

Antonio Banderos & Scarves makes headwear that is very popular in the fall-winter season. Units sold are anticipated as:

   

     

If seasonal production is used, it is assumed that inventory will directly match sales for each month and there will be no inventory buildup.

     However, Antonio decides to go with level production to avoid being out of merchandise. He will produce the 13,300 items over four months at a level of 3,325 per month.

What is the ending inventory at the end of each month? (Leave no cells blank - be certain to enter "0" wherever required.)

     

If the inventory costs $4 per unit and will be financed at the bank at a cost of 12 percent, what is the monthly financing cost and the total for the four months? (Use 1 percent or the monthly rate.) (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

   October 1,550      November 2,550      December    5,100      January 4,100   13,300   units

Explanation / Answer

Assuming no opening inventory in oct

Ending inventory in OCt=Opening stock+Production units-Sale units

=0+3325-1550

=1775 units

Ending inventory in Nov=1775+3325-2550

=2550 units

Ending inventory in Dec=2550+3325-5100

=775 units

Ending inventory in Jan=775+3325-4100

=0 units

MOnthly financing cost shall be equal to=3325*1%*4

=$133

Total cost shall be=133*4

=$532

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