The management of Nicto Company plans to have an inventory at the end of each month equal to 20% of the next month's sales. Budgeted sales in units over the next three months are 80,000 in October, 120,000 in November, and 100,000 in December. Budgeted production for November would be:

Answer:

Calculation of budgeted production for Novemebr:

Particulats	Amount (in units)
Budgeted unit sales in November	120000
Add: Desired ending inventory (100000 x 20%)	20000
Total needs	140000
Less: Desired beginning inventory (120000 x 20%)	24000
Required production for November	116000
Explanation:

Ending inventory is 20% of the next month's sales.

1) Desired ending inventory for November = Budgeted sales in december x 20%

= 100000 units x 20%

= 20000 units

2) Desired beginning inventory for november is equal to the desired ending inventory for October. It is calculated as:

Desired ending inventory for October = Budgeted sales in November x 20%

= 120000 units x 20%

= 24000 units

Therefore.  Budgeted production for November would be 116000 units.

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