Fi a company has a policy of maintaining an inventory of finished goods equal to 30 percent of the following month's sales. For the forthcoming month of March, Ball has budgeted the beginning inventory at 30,000 units and the ending inventory at 33,000 units. This suggests that ?
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If Crosser Company were to manufacture 400,000 finished units (in total) during the first two quarters of 2009, how many units of raw material would it need to purchase?
Prepare the purchases budget for the first six months of 2009.
To determine what this suggests, we need to calculate the expected sales for the forthcoming month of March. We can do this by using the given information about the beginning inventory, ending inventory, and the company's policy of maintaining an inventory equal to 30% of the following month's sales.
1. Calculate the desired inventory level for the forthcoming month:
The desired inventory level is equal to 30% of the following month's sales. So, the desired inventory level is 30% of the sales in March.
Desired inventory = 30% of the following month's sales.
2. Calculate the change in inventory from the beginning to the end of the month:
The change in inventory is equal to the ending inventory minus the beginning inventory.
Change in inventory = Ending inventory - Beginning inventory.
3. Calculate the expected sales for the forthcoming month:
To find the expected sales, we can use the equation:
Expected sales = Change in inventory / Desired inventory level.
Now let's plug in the given values:
Beginning inventory = 30,000 units
Ending inventory = 33,000 units
1. Calculate the desired inventory level:
Desired inventory = 0.30 * (Expected sales in March)
2. Calculate the change in inventory:
Change in inventory = Ending inventory - Beginning inventory
= 33,000 - 30,000
= 3,000 units
3. Calculate the expected sales in March:
Expected sales = Change in inventory / Desired inventory level
= 3,000 units / 0.30
= 10,000 units
Therefore, the suggested value for the expected sales in March is 10,000 units based on the given beginning inventory of 30,000 units and ending inventory of 33,000 units.