Question
Madonnas Clothiers sells scarves that are very popular in the fall-winter season. Units sold are anticipated as follows: October 1,100 November 2,100 December 4,200 January
Madonnas Clothiers sells scarves that are very popular in the fall-winter season. Units sold are anticipated as follows:
October | 1,100 |
November | 2,100 |
December | 4,200 |
January | 3,200 |
10,600 | |
If seasonal production is used, it is assumed that inventory will directly match sales for each month and there will be no inventory buildup. The production manager thinks the above assumption is too optimistic and decides to go with level production to avoid being out of merchandise. He will produce the 10,600 items at a level of 2,650 per month. a. What is the ending inventory at the end of each month? Compare the units sold to the units produced and complete the table below. (Do not leave any empty spaces; input a 0 wherever it is required. Negative values should be indicated by a minus sign.)
Madonnas Clothiers | |||||||||
Units sold | Units Produced | Change in inventory | Ending inventory | ||||||
October | |||||||||
November | |||||||||
December | |||||||||
January | |||||||||
b. If the inventory costs $2 per unit and will be financed through the bank at 12 percent per annum, what is the monthly financing cost and the total for the four months? (Use 1 percent or the monthly rate.) (Do not leave any empty spaces; input a 0 wherever it is required.)
Inventory financing cost | |
October | $ |
November | |
December | |
January | |
Total financing cost | $ |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started