QUESTION 5

Rover Ltd is a NEW business and is expecting the following sales figures in the coming months.

Units	September	October	November	December	January
Sales	2000	2200	2300	2500	2500

Each unit produced requires 2kg of raw material.

The policy is to hold raw materials inventory equivalent to 50% of the next months production and to hold finished goods inventory equivalent to 30% of the next months sales.

a) Compile the production budget (in UNITS) for Rover Ltd for EACH of the three months, September to November.

b) Compile the raw materials budget (in KGs) for Rover Ltd for EACH of the three months, September to November.

c) The sales manager has just been told that one of the machines used for production will not be useable in October, this will lead to a shortfall in production. It will not be possible to purchase a new machine for 3 months. Discuss TWO solutions you as manager would suggest along with their pros and cons.

d) In January the production manager has suggested buying a new machine, before this happens what calculations could be done?

e) with reference to 5d) discuss which method you would consider the best and why?