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 3,700
April 7,700
May 12,400
June 10,400
34,200 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 34,200 units over four months at a level of 8,550 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.
b. If the inventory costs $12 per unit and will be financed at the bank at a cost of 6 percent, what is the monthly financing cost and the total for the four months?