g Jannusch Corporation makes one product. Budgeted unit sales for July, August, September, and October are 10,000, 11,600, 13,300, and 12,700 units, respectively. The ending finished goods inventory should equal 20% of the following month's sales. The budgeted required production for August is closest to: A. 16,580 units B. 11,940 units C. 11,600 units D. 14,260 units

The correct answer is B.

Explanation:

Giving the following information:

Sales:

July = 10,000

August = 11,600

October = 13,300

The ending finished goods inventory should equal 20% of the following month's sales.

To calculate the production required, we need to use the following formula:

Production = sales + desired ending inventory - beginning inventory

Production = 11,600 + (13,300*0.2) - (11,600*0.2)

Production = 11,940 units

The budgeted required production for August is 11940 units and option B is the correct answer.

Explanation:

The opening inventory in August will be 20% of the August's sales in units.

Thus, the opening inventory for August = 0.2 * 11600 = 2320 units

The Production in August should be enough to meet the desired closing inventory for August and the remaining sales requirements for August after selling off the beginning Inventory for August.

The desired closing inventory in August is equal to 20% of September's sales requirements.

Desired Closing Inventory - August = 13300 * 0.2 = 2660 units

Production in August = Desired Closing Inventory + Sales - Opening Inventory

Production in August = 2660 + 11600 - 2320 = 11940 units