Bambino Sporting Goods makes baseball gloves that are very popular in the spring and early summer season. Units sold are anticipated as follows: Monthly Unit Sales
March 3,150
April 7,150
May 11,300
June 9,300
30,900 Total units sold
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 preceding assumption is too optimistic and decides to go with level production to avoid being out of merchandise. He will produce the 30,900 units over four months at a level of 7,725 per month.
a. What is the ending inventory at the end of each month? Compare the unit sales to the units produced and keep a running total.
Ending Inventory
March units
April units
May units
June 0 units
b. If the inventory costs $16 per unit and will be financed at the bank at a cost of 12 percent, what is the monthly financing cost and the total for the four months? (Use 1.0 percent as the monthly rate.)
Inventory Financing Cost
March
April
May
June
Total financing cost