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Finished goods budget

AARSHIA7y ago
Wellyboot Manufacturing has two main products ‘Blue boot’ and ‘Red boot’. Both products use the same common material and labour but in differing proportions. The annual budget is broken down into four separate 13 week periods. The following information relates to the 13 week period ended 31 March 20X3. Marketing and production data Budgeted sales (volume in units). BB. RB 850.1250 Inventory levels at the start of the budget period. Finished goods BB – 165 RB – 365 At the end of the period inventory levels are planned as – • Finished goods of ‘BB’ should be 7 days sales volume. • Finished goods of ‘RB’ should be 14 days sales volume. • Assume a five day week for both sales and production. Calculate – Production budgets in units for ‘Blue boot’ and ‘Red boot’ products. Sir however my doubt Is how to calculate the closing stock of finished goods? The last adjusment of 7 days and 14 days. This is confusing. What do they mean by 7 days and 14 days of sales volume ?
John MoffatJohn MoffatTutor7y ago#1
It means having enough inventory to last for 7 or 14 days. The sales of BB are 850 for 13 weeks, which is 65 days. They are therefore selling 850/65 per day, and so to have enough inventory to last for 7 days means having 7 x 850/65 units.
Nnishita4y ago#2
what about the raw material
John MoffatJohn MoffatTutor4y ago#3
The question asks about the closing inventory of finished goods. Any raw material inventories are nothing to do with it.
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