The Volt Company has forecast its sales in units as follows: January 800, Februa

Question

The Volt Company has forecast its sales in units as follows: January 800, February 650, March 600, April 1100, May 1350, June 1500, July 1200,. Volt Battery always keeps an ending inventory equal 120 percent of the next months expected sales. The ending inventory for December (January's beginning inventory
0 is 960 units, which is consistent with this policy.
Materials cost $12 per unit and are paid for in the month after purchase. Labor cost is $5 per unit and is paid in the month the cost is incurred. Overhead costs are $6,000 per month. Interest of $8,000 is scheduled to be paid in March, and employee bonuses of $13,200 will be paid in June.
Prepare a monthly production schedule and monthly summary of cash payments for January thru June. Volt produced 600 units in December.

Explanation / Answer

Volt Battery Company

Production Schedule Jan. Feb. March April May June July

Forecasted unit sales 800 650 600 1,100 1,350 1,500 1,200 +

Desired ending inventory 780 720 1,320 1,620 1,800 1,440

Beginning inventory 960 780 720 1,320 1,620 1,800 =

Units to be produced 620 590 1,200 1,400 1,530 1,140

==================================

Summary of Cash Payments Dec. Jan. Feb. March April May June

Units produced 600 620 590 1,200 1,400 1,530 1,

Material cost ($12/unit) $ $ 7,440 $ 7,080 $14,400 $16,800 $18,360

month after purchase 7,

Labor cost ($5/unit) month 3,100 2,950 6,000 7,000 7,650 $ 5,700

incurred Overhead cost 6,000 6,000 6,000 6,000 6,000 6,000

Interest 8,000

Employee bonuses 13,200

Total Cash Payments $16,30 $16,390 $27,080 $27,400 $30,450 $43,260

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