Question

Offenbach & Son has just made its sales forecasts and its marketing department estimates that the company will sell 237,000 units during the coming year. In the past, management has maintained inventories of finished goods at approximately one month’s sales. The inventory at the start of the budget period is 16,000 units. Sales occur evenly throughout the year. Required: Estimate the production level required for the coming year to meet these objectives. (Do not round intermediate calculations.)

Answer 1

Answer:

240,750 units

Explanation:

For computing the production level, first we have to determine the required inventory at the end of the year which is shown below:

Required inventory = Estimated sales ÷ total number of months in a year

                                = 237,000 units ÷ 12 months

                                = 19,750 units

Now the total units would be

= 237,000 units + 19,750 units

= 256,750 units

And the inventory at the beginning of the period is $16,000 units

So, the production level would be

= 256,750 units - 16,000 units

= 240,750 units