Cardinal Company has finished goods inventory of 55,000 units on January 1. Its projected sales for the next four months are: January, 200,000 units; February, 180,000 units; March, 210,000 units; and April, 230,000 units. Cardinal Company wishes to maintain a desired ending finished goods inventory of 20% of the following month's sales.
-Willow Valley's April sales forecast projects that 7,000 units will sell at a price of $10.50 per unit. The desired ending inventory is 30% higher than the beginning inventory, which was 1,000 units. Budgeted production in April would be
A)8,000 units
B)7,000 units
C)7,300 units
D)6,300 units

Question

Cardinal Company has finished goods inventory of 55,000 units on January 1. Its projected sales for the next four months are: January, 200,000 units; February, 180,000 units; March, 210,000 units; and April, 230,000 units. Cardinal Company wishes to maintain a desired ending finished goods inventory of 20% of the following month's sales.​
-Willow Valley's April sales forecast projects that 7,000 units will sell at a price of $10.50 per unit. The desired ending inventory is 30% higher than the beginning inventory, which was 1,000 units. Budgeted production in April would be
A)8,000 units
B)7,000 units
C)7,300 units
D)6,300 units

Quizplus · Accepted Answer

For Cardinal Company, the desired ending inventory for April (to support May sales) is 20% of the next month's sales. However, we don't have May's sales figures, so we can't calculate Cardinal's April production. For Willow Valley, the desired ending inventory is 30% higher than the beginning inventory of 1,000 units, making it 1,300 units. Adding this to the April sales forecast of 7,000 units, the total is 8,300 units. Since the beginning inventory is 1,000 units, the budgeted production for April is 8,300 - 1,000 = 7,300 units.

Cardinal Company Has Finished Goods Inventory of 55,000 Units on January