Question

Quality Foods has budgeted $1,500,000 in sales of ginger chicken for May. It wants to end every month with inventory equal to 10 days’ worth of the next month’s sales (based on a 30-day month). April sales are projected at $1,400,000. The sales price is $5 per box. Inventory at the beginning of April is estimated at 93,400 boxes of ginger chicken. How many boxes of ginger chicken Quality Foods should manufacture in April?

Answer 1

Answer:

Quality Foods should manufacture 286,600 boxes of ginger chicken

Explanation:

May sales budget = $1,500,000

Expected ending worth of inventory in April = 10 days worth of May Budget

if 1,500,000 is expected in Sales, then worth of April end stock should be 10 days worth of the total May budget

= 1,500,000/30days * 10 = $500,000

Since 1 box = $5

Then the number of boxes expected to be in inventory at the end of April = $500,000/$5 = 100,000 boxes

Hence the inventory at the end of April should be 100,000 boxes

If April Budget = $1,400,000

Stock to be produced in April = $1,400,000/$5 = 280,000

Hence in April, the expected number of boxes to be sold is 280,000

If at the beginning of April we gad 93,400 boxes of ginger chicken,

the additional to be produced to make 280,000 will be

= 280,000 - 93400 = 186,600

= Hence Quality Food must produce 186,000 boxes to meet up with their April sales budget.

However, since 100,000 boxes are expected to be carried over to May in inventory, we have

186,000 + 100,000 = 286,600 boxes of ginger chicken.