A Sales Budget Is Given Below for One of the Products

question 277

Essay

A sales budget is given below for one of the products manufactured by the Key Company:
The inventory of finished goods at the end of each month should equal 20% of the next month's sales. However, on December 31 the finished goods inventory totaled only 4,000 units. Each unit of product requires three specialized electrical switches. Since the production of these specialized switches by Key's suppliers is sometimes irregular, the company has a policy of maintaining an ending inventory at the end of each month equal to 30% of the next month's production needs. This requirement had been met on January 1 of the current year.Required:a. Prepare a budget showing the required production each month for January, February, March, and April. b. Prepare a budget showing the quantity of switches to be purchased each month for January, February, and March.

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Definitions:

Personal Consumption Expenditures

The component of a nation's economy that includes the total amount spent by individuals and households on goods and services.

Market Value

The current price at which an asset or service can be bought or sold in the market.

Net Domestic Investment

The total investment in a country's economy in a given year, minus the depreciation on existing capital.

Gross Domestic Investment

The total amount of money that is invested within a country’s borders in the form of capital purchases and investments in construction and inventory changes.