Question

Esquire Products Inc. expects the following monthly sales:

January	$	47,000	July	$	41,000
February		38,000	August		45,000
March		31,000	September		48,000
April		33,000	October		53,000
May		27,000	November		61,000
June		25,000	December		43,000
Total sales = $492,000

Cash sales are 40 percent in a given month, with the remainder going into accounts receivable. All receivables are collected in the month following the sale. Esquire sells all of its goods for $2 each and produces them for $1 each. Esquire uses level production, and average monthly production is equal to annual production divided by 12.

a. Generate a monthly production and inventory schedule in units. Beginning inventory in January is 31,000 units.

Answer 1

Below is the chart computing units sold per month:

Month	Sales	SP	Units
Jan	$     47,000.00	2	23500
Feb	$     38,000.00	2	19000
Mar	$     31,000.00	2	15500
Apr	$     33,000.00	2	16500
May	$     27,000.00	2	13500
Jun	$     25,000.00	2	12500
Jul	$     41,000.00	2	20500
Aug	$     45,000.00	2	22500
Sep	$     48,000.00	2	24000
Oct	$     53,000.00	2	26500
Nov	$     61,000.00	2	30500
Dec	$     43,000.00	2	21500
Total	$ 4,92,000.00		246000

Units sold = Sales value/ Sales price

January Units sold = 47000/ 2 = 23500 units And so on

So total units sold during the year is 246000 which is the sum of monthly unit sold

If opening inventory is 31000 units so those produced during the year were 246000-31000 = 213000

Therefore monthly production will be 213000/12 = 17916.67 or 17917 rounded off

Inventory Schedule is as follows:

Month	Opening units	Produced	Sold	Closing units
Jan	31000	17917	23500	25417
Feb	25417	17917	19000	24334
Mar	24334	17917	15500	26751
Apr	26751	17917	16500	28168
May	28168	17917	13500	32585
Jun	32585	17917	12500	38002
Jul	38002	17917	20500	35419
Aug	35419	17917	22500	30836
Sep	30836	17917	24000	24753
Oct	24753	17917	26500	16170
Nov	16170	17917	30500	3587
Dec	3587	17917	21500	4

4 units remaining is only because of the rounding off otherwise there would not be any closing inventory left.

Opening balance + produced - Sold = Closing balance

Opening balance for feb onwards is the closing balance of the previous month