Question

Furniture, Inc., estimates the following number of mattress sales for the first four months of 2020:

Month Sales
January 10,000
February 14,000
March 13,000
April 16,000
Finished goods inventory at the end of December is 3,000 units. Target ending finished goods inventory is 30% of the next month's sales. How many mattresses need to be produced in January 2020?

Answer 1

Furniture, Inc. needs to produce 11,200 mattresses in January 2020, calculated by adding the January sales forecast and target ending inventory for January, then subtracting the beginning inventory for January.

Step-by-step explanation:

The question involves calculating the number of mattresses that need to be produced by Furniture, Inc. in January 2020 considering the sales forecast and target ending inventory levels. To calculate this, we need to consider the sales forecast for January, the target ending inventory for February (30% of February's sales), and the existing inventory at the end of December.

Here's the step-by-step calculation:

Forecasted sales for January 2020: 10,000 mattresses

Target ending inventory for January (which will be the beginning inventory for February): 30% of February's sales, so 0.30 x 14,000 = 4,200 mattresses

Ending inventory for December (beginning inventory for January): 3,000 mattresses

To find out how many mattresses need to be produced in January, we subtract the beginning inventory for January from the sum of forecasted sales for January and the target ending inventory for January:

Required production = Forecasted sales + Target ending inventory - Beginning inventory

Required production = 10,000 + 4,200 - 3,000

Required production = 11,200 mattresses

Therefore, Furniture, Inc. needs to produce 11,200 mattresses in January 2020.