Homework Answers
Answer
Option c) is correct. $31,860
Reason:
The logic is- First finf out production needs of a month by multiplying sales bu 60 percent. Then, 20% of those production requirements are to be kept as inventory for the next month. Thus, 20% inventory requirements for Feb would have been kept in Jan and 20% production requirements for March need to be kept in February.
Production budget in Feb 2020 = 0.6 * Feb Sales * 0.8 + 0.6 * 0.2 * March Sales
= 0.6 * 51000 * 0.8 + 0.6 * 0.2 * 61500
= 24480 + 7380
= $31,860
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