Bengal Co provides the following sales forecast for the next

Bengal Co. provides the following sales forecast for the next three months: July August September Sales units 5,000 5,700 5,560 10 The company wants to end each month with ending finished goods inventory equal to 25% of the next month’s sales. Finished goods inventory on June 30 is 1,250 units. The budgeted production units for July are: A. 6,250 units. B. 3,750 units. C. 6,425 units. D. 2,500 units. E. 5,175 units.

Solution

Finished goods inventory for july = 25% of sale foecast of august = 25% of 5700 = 1425

budgeted production= sale forecast of july + Finished goods inventory for july - Finished goods inventory on June = 5000+1425-1250 = 5175

option E.