A Sales Budget Is Given Below for One of the Products

question 78

Essay

A sales budget is given below for one of the products manufactured by the OMI Co.: The inventory of finished goods at the end of each month must 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 pounds of specialized material. Since the production of this specialized material by OMI'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:

Negative Correlation

When one variable is high, the other variable tends to be low.

High

A state of elevated status, rank, or a measure, often referring to measurements, quantities, or feelings of euphoria.

Correlation

A mutual relationship or connection between two or more things where a change in one is associated with a change in the other.

Statistically Significant

Having a probability of less than 5% that the results are due to random chance.