Question

Patiomaster Products manufactures patio furniture. The estimated numbers of sets to be sold for the last three months of 2020 is:

Month	Sales
October	10,000
November	7,000
December	5,000
January	6,000

Finished goods inventory at the end of September is expected to be 3,000 units. Finished goods inventory is set at 30 percent of next month's sales.

How many tables will need to be produced in December?

Select one:

a. 1,500 units

b. 6,800 units

c. none of these

d. 5,300 units

e. 5,000 units

Answer 1

Answer: Option d. 5,300 units

Computation of production of tables in December is as follows:

	Number of tables
Estimated Sales in December	5,000
Add: Ending Inventory in December	1,800
Total Production needed	6,800
Less: Beginning Inventory in December	1,500
Number of tables to be produce	5,300

Thus 5,300 tables will need to produced in December. (Answer: Option d. 5,300 units)

Working note:

1. Calculation of Ending Inventory in December is as follows:

Finished goods inventory is set at 30 percent of next month's sales.

Thus, Ending Inventory of December = 30% of January sales

= 6000*30%

= 1800 units

Thus, Ending Inventory of December 1800 units

2. Calculation of Beginning Inventory in December is as follows:

Beginning Inventory in December = Ending Inventory of November

Thus, we will compute Ending inventory of november that will be beginning inventory of december.

Ending Inventory of November = 30% of December sales

= 5000*30%

= 1500

Thus, Ending Inventory of November is 1500 units; Beginning Inventory in December is 1500 units