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18 June, 14:20

Aloan Co. provides the following sales forecast for the next three months: January February March Sales units 3,000 4,200 5,000 The company wants to end each month with ending finished goods inventory equal to 10% of the next month's sales. Finished goods inventory on December 31 is 300 units. The budgeted production units for January are:

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  1. 18 June, 14:39
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    Total = 3,120 units

    Explanation:

    Giving the following information:

    production budget:

    January = 3,000 units

    February = 4,200 units

    March = 5,000 units

    The company wants to end each month with ending finished goods inventory equal to 10% of the next month's sales.

    Beginning inventory = 300 units.

    To calculate the production for any month, we need to use the following formula:

    Production = sales + desired ending inventory - beginning inventory

    January:

    Sales = 3,000

    Desired ending inventory = (4,200*0.1) = 420

    Beginning inventory = (300)

    Total = 3,120 units
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