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Deacon Inc. produces leather handbags. The production budget for the next four months is: July 5,840...

Deacon Inc. produces leather handbags. The production budget for the next four months is: July 5,840 units, August 6,810, September 7,300, October 8,530. Each handbag requires 0.4 square meters of leather. Deacon Inc.’s leather inventory policy is 25% of next month’s production needs. If the leather policy is met, what will the July 31 inventory be?
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Answer #1
July Aug Sep Oct
Production Budget (in units)-----------------------------------------------------------------(A)
5840 6810 7300 8530
Leather required for fulfilment of same (in square meters)................(A) * 0.40 sq. mtrs 2336 2724 2920 3412
closing stock of raw material i.e. leather..............25% of next month's production needs 681 730 853

Final Answer -

July 31 inventory would be as follows -

Raw Material Inventory - 681 square meters of leather.

Finished Goods inventory - 5840 units of handbags.

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