Question

Wright Lighting Fixtures forecasts its sales in units for the next four months as follows:

March	17,000
April	19,000
May	16,500
June	15,000

Wright maintains an ending inventory for each month in the amount of one times the expected sales in the following month. The ending inventory for February (March’s beginning inventory) reflects this policy. Materials cost $4 per unit and are paid for in the month after production. Labor cost is $8 per unit and is paid for in the month incurred. Fixed overhead is $17,500 per month. Dividends of $21,100 are to be paid in May. The firm produced 16,000 units in February.

Complete a production schedule and a summary of cash payments for March, April, and May. Remember that production in any one month is equal to sales plus desired ending inventory minus beginning inventory.

Answer 1

Answer-

As Given in the above question

1.Wright maintains an ending inventory for each month in the amount of one times the expected sales in the following month. Hence closing inventory for March must be equal to the expected sales of next month ie April

And so on

2.Opening Stock+Units produced -unit sold=Closing stock

We can find the production schedule(in units) as follows

March. April. May

Production. 19000. 16500. 15000

Sales. 17000. 19000. 16500

Opening stock 17000. 19000 16500

Closing stock. 19000. 16500. 15000

Summary of cash payments(in $) will be as follows

March. April. May

Material. 64000. 76000. 66000

Labor. 152000. 132000. 120000

Fixed 17500. 17500. 17500

Dividend. 0. 0. 21100

Total $233500. $225500. $224600

Working notes

1.Material cost @4$ each unit of production(paid in next month of production).   

2.labor@ $8 )per unit of production (paid same month of production)

3.fixed overhead (same month)

4.dividend(only in may)