Question

Wright Lighting Fixtures forecasts its sales in units for the next four months as follows: March 13,000 April 15,000 May 12,500 June 11,000 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 $5 per unit and are paid for in the month after production. Labor cost is $9 per unit and is paid for in the month incurred. Fixed overhead is $15,500 per month. Dividends of $20,700 are to be paid in May. The firm produced 12,000 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.

Answer 1

Production Schedule:

	March	April	May
Budgeted Sales	13,000	15,000	12,500
Add: Desired Ending Inventory	22,500	18,750	16,500
Total Required	35,500	33,750	29,000
Less: Beginning inventory	19,500	22,500	18,750
Required Production	16,000	11,250	10,250

Cash Payments

	March	April	May
Material- Next month	60,000	80,000	56,250
Labor Cost	144,000	101,250	92,250
Fixed overhead	15,500	15,500	15,500
Dividends			20,700
Cash payments	219,500	196,750	184,700