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Mobile App Chapter 2: 22BP (page 118)
Wright Lighting Fixtures forecasts its sales in units for the next four months as follows:
March | 4,000 |
April | 10,000 |
May | 8,000 |
June | 6,000 |
Wright maintains an ending inventory for each month in the amount of one and one-half times the expected sales in the following month. The ending inventory for February (March’s beginning inventory) reflects this policy. Materials cost \(7 per unit and are paid for in the month after production. Labor cost is \)3 per unit and is paid for in the month incurred. Fixed overhead is \(10,000 per month. Dividends of \)14,000 are to be paid in May. Eight thousand units were produced in February.
Complete a production schedule and a summary of cash payments for
March, April, and May. Remember that production in any one month is equal to
sales plus desired ending inventory minus beginning inventory.
Short Answer
Production schedule
March | April | May | June | |
Forecasted unit sales | 4,000 | 10,000 | 8,000 | 6,000 |
Add: Desired ending inventory | 15,000 | 12,000 | 9,000 | |
Less: Beginning inventory | 6,000 | 15,000 | 12,000 | |
Units to be produced | 13,000 | 7,000 | 5,000 |
Summary of cash payments
February | March | April | May | |
Units produced | 8,000 | 13,000 | 7,000 | 5,000 |
Material cost paid month after production @($7 per unit) | $56,000 | $91,000 | $49,000 | |
Labor cost @3 per unit | 39,000 | 21,000 | 15,000 | |
Fixed overheads | 10,000 | 10,000 | 10,000 | |
Dividends | 14,000 | |||
Total cash payment | 105,000 | 122,000 | 88,000 |
Step by step solution
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