Exercise 21-8 fuqua company's sales budget projects unit sales of part 198z of 10,000 units in january, 12,000 units in february, and 13,000 units in march. each unit of part 198z requires 4 pounds of materials, which cost $2 per pound. fuqua company desires its ending raw materials inventory to equal 40% of the next month's production requirements, and its ending finished goods inventory to equal 20% of the next month's expected unit sales. these goals were met at december 31, 2016. prepare a production budget for january and february 2017. fuqua company production budget january february : :

January:

we start with expected sales (10,000 units) and then we must add ending inventory (20% of February's expected sales = 12,000 x 20% = 2,400) minus beginning inventory of finished parts (20% of January's expected sales = 10,000 x 20% = 2,000).

= 10,000 + 2,400 - 2,000 = 10,400 units

February:

again we start with expected sales (12,000 units) and then we must add ending inventory (20% of March's expected sales = 13,000 x 20% = 2,600) minus beginning inventory of finished parts (2,400 from January).

= 12,000 + 2,600 - 2,400 = 12,200 units

production budget finished 198z parts

                                                            January              February

Expected sales in units                       10,000                 12,000

+ ending inventory                                2,400                  2,600  

subtotal                                                12,400                  14,600

- beginning inventory                         (2,000)                  (2,400)  

required production units                   10,400                  12,200

rational decision making is a multi-step process for making choices between alternatives. the process of rational decision making favors logic, objectivity, and analysis over subjectivity and insight. the word “rational” in this context does not mean sane or clear-headed as it does in the colloquial sense.

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answer; tech (a) is correct;