Question

Varney Company makes rolling suitcases. Its sales budget for four months is:

                                                                     Sales
                     Month
                                                                       R

                      March                                         15,000

                      April                                         20,000

                       May                                          40,000

                      June                                          60,000

Varney's policy is that ending inventory of finished suitcases should equal 30% of the next
month's sales. Beginning inventory (March 1) is 5,300 suitcases.

Each suitcase required 1.5 meters of ballistic nylon. The ending inventory policy for nylon is
that 20% of the following month's production needs must be on hand. On March 1, Varney
had 10,450 meters of nylon in inventory.

Required:

3.1   What is the desired ending inventory of suitcases for April?                         (1)
3.2   What is the budgeted production of suitcases for April?                              (1)
3.3   What is the desired ending inventory of nylon for March?                             (1)
3.4   What are the budgeted meters of nylon to be purchased in March?                      (1)
3.5   Assuming each suitcase required two meters of ballistic nylon, what is the desired ending
      inventory of nylon for March?                                                        (1)

Varney Company makes rolling suitcases. Its sales budget for four months is:

                                                                     Sales
                     Month
                                                                       R

                      March                                         15,000

                      April                                         20,000

                       May                                          40,000

                      June                                          60,000

Varney's policy is that ending inventory of finished suitcases should equal 30% of the next
month's sales. Beginning inventory (March 1) is 5,300 suitcases.

Each suitcase required 1.5 meters of ballistic nylon. The ending inventory policy for nylon is
that 20% of the following month's production needs must be on hand. On March 1, Varney
had 10,450 meters of nylon in inventory.

Required:

3.1   What is the desired ending inventory of suitcases for April?                         (1)
3.2   What is the budgeted production of suitcases for April?                              (1)
3.3   What is the desired ending inventory of nylon for March?                             (1)
3.4   What are the budgeted meters of nylon to be purchased in March?                      (1)
3.5   Assuming each suitcase required two meters of ballistic nylon, what is the desired ending
      inventory of nylon for March?                                                        (1)

Answer 1

A.
12,000 (see table below)
B.
26,000 (see table below)
	March	April	May
Sales	15000	20000	40000
Add: Desired EI	6000	12000	18000
Units needed	21000	32000	58000
Less: - Beginning inventory	5300	6000	12000
Production	15700	26000	46000
C.
7,800 metres (26,000 x 1.5 x 20%)
D.
20,900 metres (see table below)
	March	April
Production	15,700	26,000
x 1.5 m	1.5	1.5
Nylon needed for production	23,550	39,000
Add: Desired ending inventory Nylon needed	7,800
Nylon needed	31,350
Less: Beginning inventory	10,450
Purchases of nylon in metres	20,900
E.
10,400 metres (26,000 x 2 x 20%)