(a) For each of the following, state three reasons why a firm may wish to keep:

(i ) a minimum stock level of finished goods, and

(ii ) an even level of production in the face of fluctuating demand.

(b) The sales forecast for Douglas & Co for July–December 20X7 is:

J A S O N D Units 280 200 260 360 400 420 Produce a production budget showing montly opening and closing stock figures if the firm wishes to maintain an even level of producing 300 units each month, and a minimum stock level of 150 units.

What must the opening stock be at 1 July to achieve this?

(c) Under what circumstances, in budgetary control, may a firm’s productive capacity prove to be its limiting or key factor?