Santorini Corporation Has Experienced a Number of Out-Of-Stock Situations with Respect

question 31

Essay

Santorini Corporation has experienced a number of out-of-stock situations with respect to its finished-goods inventories. Inventory at the end of May, for example, was only 50 units-an all-time low.
Management desires to implement a policy whereby finished-goods inventory is 70% of the following month's sales. Budgeted sales for June, July, and August are expected to be 5,000 units, 5,600 units, and 5,500 units, respectively.
Required:
Determine the number of units that Santorini must produce in June and July.

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Definitions:

Total Manufacturing Costs

The sum of direct materials, direct labor, and manufacturing overhead incurred in producing goods.

Direct Labor Cost

The wages and salaries paid to employees who are directly involved in producing goods or providing services.

Total Manufacturing Costs

The sum of all costs directly involved in producing a product, including raw materials, labor, and manufacturing overhead.

Manufacturing Overhead

Costs incurred in the manufacturing process that are not directly tied to a specific product, including indirect materials, indirect labor, and other factory-related expenses.