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Hi Sir, please help with question.
Tathbone plc is preparing its budgets for the coming year. It expects to be able to sell 5,000
units of its only product, the Graham, in January 20X7. Sales are then expected to rise to
5,500 units in February and 7,000 units in March, and then remain stable for the rest of the year.
Tathbone plc aims to carry a finished goods inventory at the end of each month equal to 10%
of the following month’s sales. Each Graham takes four labour hours to make.
Tathbone’s 138 production workers are employed on contracts that require them to work a
minimum of 160 hours per month and are each paid $1,280 per month. Production workers
are highly skilled and require a minimum of one year’s training. In the short term it is not
possible to recruit any more production workers. Any labour hours required in excess of 160
hours per worker are made up by overtime that is paid at basic rate plus an overtime
premium of 50%.
Required:
(a) Calculate the production budget in units, showing opening and closing inventories of finished goods (to the nearest whole number).How do i find the closing inventory for march and the opening inventory for January.
Why are you attempting a question for which you do not have an answer? You should be using a Revision Kit – it has answers and explanations 🙂
You can calculate the closing inventory each month (which is the opening inventory of the following month) by taking 10% of the following months sales, and the unit sales each month are given in the question.
Have you watched my free lectures on budgeting? The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
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