Yosko Company expects to sell 2 comma 000 units of finished product in January and 2 comma 150 units in February. The company has 260 units on hand on January 1 and desires to have an ending inventory equal to 40 % of the next month's sales. March sales are expected to be 2 comma 270 units. Prepare Yosko 's production budget for January and February.

Question

Leonidas Werner

Business

7 March, 06:28

Yosko Company expects to sell 2 comma 000 units of finished product in January and 2 comma 150 units in February. The company has 260 units on hand on January 1 and desires to have an ending inventory equal to 40 % of the next month's sales. March sales are expected to be 2 comma 270 units. Prepare Yosko 's production budget for January and February.

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Micheal Lindsey · Answer 1

Production budget

January 2,600 units

February 2,198 units

Explanation:

The sales budget is adjusted for the projected opening and closing inventories unit to arrive at the production budget:

The production budget can be determined using the formula below

Production budget = Sales budget + closing inventory - opening inventory

January production budget

Sales budget = 2,000 units

Closing inventory = 40% * February sales = 40% * 2,150

Opening inventory = 260 units

Production budget for January = 2000 + (40% * 2,150) - 260 = 2,600 units

February production budget

Sales budget = 2,150

Opening inventory = January closing inventory = 860 units

Closing inventory = 40% * March sales = 40% * 2,270

Production budget fro February = 2,150 + (40% * 2,270) - 860 = 2,198 units

Production budget

January 2,600 units

February 2,198 units