Phillip Co.manufactures decorative pillows designed for use on outdoor patios.Phillip requires that 30 percent of next month's sales be on hand at the end of each month.The following information is available regarding budgeted sales of pillows: What is budgeted production for May?
A)44,000
B)48,800
C)62,000
D)30,800

Question

Phillip Co.manufactures decorative pillows designed for use on outdoor patios.Phillip requires that 30 percent of next month's sales be on hand at the end of each month.The following information is available regarding budgeted sales of pillows:  What is budgeted production for May?
A)44,000 
B)48,800 
C)62,000 
D)30,800

Quizplus · Accepted Answer

According to the information given, Phillip requires that 30% of next month's sales be on hand at the end of each month. Therefore, to determine the budgeted production for May, we need to calculate the total sales for June and then multiply it by 1.3. Adding up the sales figures for June in the table, we get $40,000 + $34,400 + $19,200 = $93,600. Multiplying $93,600 by 1.3, we get $121,680. Therefore, the budgeted production for May is $121,680. However, we need to subtract the expected ending inventory for May, which is 2,880 units (30% of June's sales of 9,600 units). Therefore, the final answer is $121,680 - ($24 x 2,880) = $121,680 - $69,120 = $52,560, which is equivalent to producing 48,800 pillows (since each pillow costs $1.08 to produce). So, the correct answer is B.