Answered: Compute the total targeted production…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Cherboneau Novelties produces drink coasters (among many other products). During the current year (year 0), the company sold 525,000 units (packages of 6 coasters). In the coming year (year 1), the company expects to sell 550,000 units, and, in year 2, it expects to sell 684,000 units. The target ending finished goods inventory for each month is equal to the next month's sales. However, because of production issues, the ending inventory in the current year (year 0) is expected to be only 14,500 units. Each unit requires 0.5 pound of cork. At the end of the current year (year 0), management expects to have 20,000 pounds of cork in inventory. Management has set a target to have cork on hand equal to one half of next month’s sales requirements during the coming year (year 1). Sales and production take place evenly throughout the year. Required: Compute the total targeted production of the finished coaster for the coming year. Compute the required amount of cork to be purchased for the coming year.

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