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Kawards & Layyers Inc. produces leather handbags. The production budget for the next four months is:...

Kawards & Layyers Inc. produces leather handbags. The production budget for the next four months is: July 5900 units, August 7200, September 8100, October 85oo Each handbag requires o.5 square meters of leather. Kaward & Layyers's leather inventory policy is 20% of next month's production needs If the leather policy is met, what will the July 1 inventory be? Select one: a. 1665.o square meters b.720.0 square meters C 140.0 square meters d. 590.o square meters
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Answer #1

Solution: Option d

Kaward & Layyers's leather inventory policy is 20% of next month's production needs.

Therefore, in order to arrive at the leather inventory as on July 1 ( assumed to be the opening balance), the closing balance of the leather inventory as on June 30 is to be determined.

Closing balance of the leather inentory as on June 30 would be 20% of next month's production needs i.e., production budget for July.

= 20% * 5900 units of handbags* 0.5 square meters of leather ( Each handbag requires 0.5 square meters of leather)

= 590 square meters

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