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Treehorn prepares budgets on a quarterly basis.each quarter consists of 13 weeks with five working days per week.
It is treehorns policy to maintain an inventory of finished goods at the end of each quarter equal to five days Demand of the next quarter.
Forecast sales units for the next five quarters are
Quarter 1 1950000
Quarter 2 2275000
Quart r 3 3250000
Quart r 4 2275000
Quarter 5 1950000Whn calculating the production budget how do we calculate the closing inventory? Ans: 2275000x5days/13 weeksx5 days=175000
But when i calculate
2275000x 5days/91days(13weeks)x5days i get 625000.
Where is the mistake?
Thanks in advanceYour mistake is the 91 days. You have taken 13 weeks with 7 days a week.
However there are only 5 working days a week, and so the number of working days in a quarter is 13 x 5 = 65 days.What if the question says
It is treehorns policy to maintain an inventory of finished goods at the end of each quarter equal to four days Demand of the next quarter. And each quarter consists of 13 weeks with 5 working days.is this correct?
2275000×4/(13×5)
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