Question

# -Antonio Banderos & Scarves makes headwear that is very popular in the fall-winter season. Units sold...

-Antonio Banderos & Scarves makes headwear that is very popular in the fall-winter season. Units sold are anticipated as:

Monthly Unit Sales

October 2,200

November 3,200

December 6,400

January 5,400

17,200 Total units sold

If seasonal production is used, it is assumed that inventory will directly match sales for each month and there will be no inventory buildup.

However, Antonio decides to go with level production to avoid being out of merchandise. He will produce the 17,200 items over four months at a level of 4,300 per month.

a. What is the ending inventory at the end of each month? Compare the unit sales to the units produced and keep a running total.
-October___ units

-November___units

-December___units

-January___units

b. If the inventory costs \$6 per unit and will be financed at the bank at a cost of 12 percent, what is the monthly financing cost and the total for the four months? (Use 1 percent as the monthly rate.)

-October

-November

-December

-January

-Total Financing cost

 Month Units in beginning month inventory Unit produced Units sold Units in month end inventory = units in beginning inventory + units produced - unnits sold October 0 4300 2200 2100 November 2100 4300 3200 3200 December 3200 4300 6400 1100 January 1100 4300 5400 0 2- Month Units in month end inventory = units in beginning inventory + units produced - units sold Monetary value of inventory = units in inventory* unit cost Financing cost = monetary value of inventory*financing cost October 2100 12600 126 November 3200 19200 192 December 1100 6600 66 January total financing cost 0 0 0 384

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