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:

Monthly Unit Sales

October 1,350

November 2,350

December 4,700

January 3,700

12,100 Total units sold

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 12,100 items over four months at a level of 3,025 per month.

a. What is the ending inventory at the end of each month? Compare the unit sales to the units produced and keep a running total

b. 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 as the monthly rate.)

Explanation / Answer

a.

b.

Inventory Cost Formula = 1675*4 = $6700 October
= 2350*4 =$9400    November
      = 675*4 = $2700    December

Financing Cost = Inventory Cost*0.01
      = 6700*0.01 = $67 October

Refer to the excel for total and the numbers.

Monthly Unit Sales Monthly Unit Produced Ending Inventory Balance October 1350 3025 1675 November 2350 3025 2350 december 4700 3025 675 January 3700 3025 0

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.