Question

Answer the following questions using the information below:

Furniture Inc. estimates the following number of mattress sales for the first four months of 2016:

Month Sales
January 22,000
February 30,800
March 28,600
April 35,200

Finished goods inventory at the end of December is 6,600 units. Target ending finished goods inventory is 20% of the next month's sales.

*43) How many mattresses need to be produced in January 2016?*
A) 15,400 mattresses
B) 21,560 mattresses
C) 28,460 mattresses
D) 34,160 mattresses

Answer 1

Furniture Inc. needs to produce 21,560 mattresses in January 2016 to meet the demand and have the target ending inventory.

Step-by-step explanation:

To calculate the number of mattresses Furniture Inc. needs to produce in January 2016, we use the following steps:

1. Start with the target ending finished goods inventory (EFI) for January which is 20% of February's sales.
2. Calculate EFI for January: 20% of 30,800 (February sales) equals 6,160 mattresses.
3. Add the EFI to January sales to find the total number of mattresses required for January: 22,000 (January sales) + 6,160 (EFI for January) equals 28,160 mattresses.
4. Subtract the existing finished goods inventory at the end of December from this total: 28,160 - 6,600 equals 21,560 mattresses.

Therefore, Furniture Inc. needs to produce 21,560 mattresses in January 2016.