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29 October, 13:56

Ruiz Co. provides the following sales forecast for the next four months. April May June July Sales (units) 500 580 540 620 The company wants to end each month with ending finished goods inventory equal to 25% of next month's forecasted sales. Finished goods inventory on April 1 is 190 units. Prepare a production budget for the months of April, May, and June.

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  1. 29 October, 16:43
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    Instructions are below.

    Explanation:

    Giving the following information:

    Sales:

    April = 500

    May = 580

    June = 540

    July = 620

    Finished goods inventory on April 1 is 190 units

    Desired ending inventory = 25% next month sales.

    To calculate the production for each month, we need to use the following formula:

    Production = sales + desired ending inventory - beginning inventory

    April:

    Sales = 500

    Desire ending inventory = (580*0.25) = 145

    Beginning inventory = (190)

    Total production = 455 units

    May:

    Sales = 580

    Desire ending inventory = (540*0.25) = 135

    Beginning inventory = (145)

    Total production = 570 units

    June:

    Sales = 540

    Desire ending inventory = (620*0.25) = 155

    Beginning inventory = (135)

    Total production = 560 units
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