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Hello, can you help how can i calculate opemning and closing onventory?
Kinn Co produces a single product. Each finished product requires 3 kg of raw materials. The raw material costs $6 per kg.You are given the following information.
(1) Kinn Co prepares budgets on a quarterly basis. Each quarter consists of 13 weeks, with five working days per week
(2) It is the company’s policy to maintain an inventory of finished goods at the end of each quarter equal to five day’s demand for the next quarter whenever possible
(3) It is not possible to hold raw material inventory because of its perishable nature, but it is possible to hold inventory of finished goods at any level
(4) Forecast sales units for the next four quarters are:
Quarter 1 1,950,000
Quarter 2 2,275,000
Quarter 3 3,250,000
Quarter 4 2,275,000
(5) Selling price is $56 per unit(6) Kinn Co aims to maximise its profits
Task 1
Calculate the budgeted opening and closing finished goods inventory for Quarter 1 to the nearest thousand units.Opening finished goods inventory ‘000 units
Closing finished goods inventory ‘000 units
At the start of quarter 1 they will have inventory of finished goods equal to 5 days demand for quarter 1. Given that each quarter is 13 weeks of 5 days, it means that the opening inventory will be 1,950,000 / 13 = 150,000 units.
It is the same logic for calculating the inventory at the end of quarter 1 (start of quarter 2).
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Thank you very much!
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