Roger is a producer of small cat toys, and he is in the process of creating a Production Budget for March of this year. He budgeted for 150 units of sales in February and expects to see a 10% increase in sales every month. Roger has created a policy where he will produce and retain 5% of next month's sales in his Finished Goods (FG) Inventory. How many Budgeted Units will Roger plan to produce for March? (Round all calculations to nearest whole unit).
A) 148
B) 157
C) 166
D) 174

Question

Quizplus · Accepted Answer

To calculate the correct number of budgeted units, employ the following formula: Budgeted Sales Volume plus Target Ending FG Inventory minus Beginning FG Inventory. To calculate Budgeted Sales, take the Budgeted Sales from February (the previous month) and multiply by 1.10 to account for the 10% increase Roger anticipates, so this would be 165 units. To calculate the target Ending FG Inventory, multiply next month's Budgeted Sales by the 5% retention that Roger would like to maintain. Next month's Sales will take 165 units (budgeted sales in March) × 1.10 (to account for the increase), so that comes out to 182 units (rounding to the nearest whole unit). Now, multiply this value by the 5% retention to arrive at 9 additional units needed. The final item to calculate is the Beginning FG Inventory. The Ending Balance for February becomes the Beginning Balance for March. To calculate this, take the 165 units budgeted for March and multiply by 5% to get 8 units (rounded to the nearest whole unit). Now, calculate F1F1F1S1?F1F1F10 165 units plus 9 units minus 8 units, and that equals 166 Budgeted Units that need to be to be produced.

Roger Is a Producer of Small Cat Toys, and He