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Balding Brothers sell paint brushes and has a budgeted unit sales of 350,000 units for March, 2023 and 240,000 units for April 2023. The company’s policy is to have finished goods inventory of units on hand at the end of each month that is equal to 25% of next month's budgeted unit sales. If there were 75,000 units of finished goods inventory on hand on February 28th, 2023, how many units should be produced in March, 2023 in order for the company to meet its goals?Group of answer choices450,500800,500480,850335,000

Question

Balding Brothers sell paint brushes and has a budgeted unit sales of 350,000 units for March, 2023 and 240,000 units for April 2023. The company’s policy is to have finished goods inventory of units on hand at the end of each month that is equal to 25% of next month's budgeted unit sales. If there were 75,000 units of finished goods inventory on hand on February 28th, 2023, how many units should be produced in March, 2023 in order for the company to meet its goals?Group of answer choices450,500800,500480,850335,000

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Solution 1

To calculate the number of units to be produced in March 2023, we need to consider the company's policy of maintaining an inventory of units equal to 25% of the next month's budgeted unit sales.

Here are the steps to calculate:

  1. Calculate 25% of April's budgeted unit sales: 240,000 units * 25% = 60,000 units. This is the desired ending inventory for March.

  2. Add the desired ending inventory for March (60,000 units) to the budgeted unit sales for March (350,000 units) = 410,000 units. This is the total number of units needed in March.

  3. Subtract the beginning inventory on hand on February 28th (75,000 units) from the total number of units needed in March.

So, 410,000 units - 75,000 units = 335,000 units.

Therefore, Balding Brothers should produce 335,000 units in March 2023 to meet its goals.

This problem has been solved

Solution 2

To calculate the number of units to be produced in March 2023, we need to follow these steps:

  1. Calculate the desired ending inventory for March 2023. This is 25% of April's budgeted unit sales, which is 240,000 units. So, 25% of 240,000 units = 60,000 units.

  2. Add the desired ending inventory for March (60,000 units) to the budgeted unit sales for March (350,000 units). This gives us a total of 410,000 units.

  3. Subtract the beginning inventory for March (which is the ending inventory for February, 75,000 units) from the total calculated in step 2.

So, 410,000 units - 75,000 units = 335,000 units.

Therefore, Balding Brothers should produce 335,000 units in March 2023 to meet its goals. So, the correct answer is 335,000.

This problem has been solved

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