A Company Expects to Begin the Coming Year with 6,000

question 77

Essay

A company expects to begin the coming year with 6,000 ceramic pots in finished goods inventory.It expects to sell 85,000 ceramic pots and end the year with 8,000 pots in the finished goods inventory.Four pounds of clay go into each ceramic pot.The company expects to have 4,000 pounds of clay on hand at the beginning of the coming year and wishes to end the year with 6,000 pounds in inventory.
a.Prepare a production budget showing the number ceramic pots that the company must manufacture to carry out these plans.
b.Prepare a direct materials purchases budget showing the number of pounds of clay that the company must purchase during the year.

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Definitions:

Cycle Service Level

A metric that measures the probability of meeting customer demand without stockouts over a standard ordering cycle, reflecting inventory efficiency and customer satisfaction.

Periodic Review Policies

Inventory management approaches where stock levels are reviewed and possibly adjusted at regular intervals, regardless of demand patterns.

Review Interval

The scheduled time period between assessments or evaluations of a system, process, or set of data to ensure accuracy and efficiency.

Standard Deviation

A statistic that measures the dispersion or spread of a set of data points relative to its mean, indicating how much variation exists from the average.