Question

Clorinox produces and sells detergent. Information about the upcoming year's budget is as follows:
The company expects to sell 50,000 bottles of detergent in the first quarter, 70,000 in the second quarter, 95,000 in the third quarter, and 46,000 in the fourth quarter. The desired ending inventory of finished goods is equal to 15% of next quarter’s sales. There are 7,500 bottles of detergent on hand at the beginning of the first quarter.

How many units will be in ending inventory at the end of the first?

How many units will be produced in the first quarter?

How much is the desired ending inventory for the first quarter?

Answer 1

Ans;

1.

Inventory at the end of first quarter will be equal to 15% of Next quarter sale.

Expected Sale in second quarter : 70,000 Units

Inventory at the end of the first quater : 70,000 * 15% = 10,500 Units

2.

Units produced in first quarter :

Sales of First Quarter + Ending Inventory of first quarter - Opening Inventory

Opening Inventory : 7,500 Units

Sales of First Quarter : 50,000 Units

Ending Inventory of first quarter : 10,500 Units

Units produced in first quarter = 50,000 + 10,500 - 7,500 = 53,000 Units

3.

Desired inventory at the end of first quarter will be same at question 1. i.e 10,500 Units

For any query please ask in comment box, we are happy to help you. Also please don't forget to provide your valuable feedback. Thanks!