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3 June, 22:48

Vermicelli Company plans to sell 200,000 units of finished product in July and anticipates a growth rate in sales of 5% per month. The desired monthly ending inventory in units of finished product is 80% of the next month's estimated sales. There are 150,000 finished units in inventory on June 30. Vermicelli Company's production requirement in units of finished product for the three-month period ending September 30 is: (CMA adapted) 712,025 units.

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  1. 3 June, 23:06
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    Production budget in July = 218,000 units

    Explanation:

    Production budget = sales budget + closing inventory - opening inventory

    August sales = 105% * July sales

    = 105% * 200,000 = 210,000

    Closing inventory in July = 80% * August sales

    = 80% * 210,000 = 168,000

    Opening inventory in July = Closing inventory in June = 150 000 units

    Production budget in July = 200,000 + 168000 - 150,000

    = 218,000 units

    Production budget in July = 218,000 units
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