Question

Wright Lighting Fixtures forecasts its sales in units for the next four months as follows: March 5,000 April 10,000 May 9,000 Jun 6,000 Wright maintains an ending inventory for each month in the amount of one and one-half times the expected sales in the following month. The ending inventory for February (March’s beginning inventory) reflects this policy. Materials cost $7 per unit and are paid for in the month after production. Labor cost is $3 per unit and is paid for in the month incurred. Fixed overhead is $10,000 per month. Dividends of $14,000 are to be paid in May. The firm produced 8,000 units in February. Complete a production schedule and a summary of cash payments for March, April, and May. Remember that production in any one month is equal to sales plus desired ending inventory minus beginning inventory. (Negative amounts should be indicated by a minus sign.)

Answer 1

Production Schedule
	March	April	May
Sales	5000	10000	9000
Add : Desired ending Inventory	15000	13500	9000
Less : Beginning Inventory	7500	15000	13500
Production (in units)	12500	8500	4500
Summary of Cash Payments
	March	April	May
Payment for Materials
- 8000 units x $7	$56,000.00
- 12500 units x $7		$87,500.00
- 8500 units x $7			$59,500.00
Payment for Labor
- 12500 units x $3	$37,500.00
- 8500 units x $3		$25,500.00
- 4500 units x $3			$13,500.00
Fixed Overhead	$10,000.00	$10,000.00	$10,000.00
Dividends			$14,000.00
Cash Payments	$103,500.00	$123,000.00	$97,000.00