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Treehorn produces a single product.the cost card for this product ias as follows
Direct materials 3 kg per at $6 per kg
direct labour 2 hrs per unit at $10 per hr
FOH 2 hrs per unit at $2 per hour
total cost 42Notes
1. treehorn prepares budgets on quaterly basis. each quarter consists of 13 weeks with 5 workind days per week
2. selling price is $56 per unit
3. it is treehorn policy to maintain an inventory of finished goods at the end of each quarter equal to 5 days demand of the next quarter.4. forecast sales unit for the next 5 quarters are
Q1 1950000 units
Q2 2275000 units
Q3 3250000 units
Q4 2275000 units
Q5 1950000 unitsrequired sales budget, production budget
my problem is related to production budget
Production Budget
000 units
Q1
Desired closing inventory 175
Sales 1950
less opening inventory 150desired closing inventory is calculated
2275000 units x 5 days /13 weeks x 5 days
the calculation of closing inventory and opening is not clear to me y do we have to multipl 5 days twice?
I don’t know where you found the question, but are you sure you have typed the answer correctly?
What I think maybe they intended to type is this:
2275000 x 5 days / (13 weeks x 5 days)
That would then be correct – to get the demand per day then divide by (13 weeks x 5 days), and then multiply by 5 days to get the inventory.
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