- January 11, 2019 at 4:23 pm
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
Inventory levels at the start of the budget period.
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.
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 ?January 12, 2019 at 9:15 am
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.
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