Fiwrt corporation manufactures and sells stainless steel coffee mugs. expected mug sales fiwrt (in units) for the next three months are as follows: october november december budgeted unit sales 30,000 36,000 34,000 fiwrt likes to maintain a finished goods inventory equal to 30% of the next month's estimated sales. how many mugs should fiwrt plan on producing during the month of november? multiple choice 26,800 mugs 34,300 mugs 35,400 mugs 36,000 mugs

To calculate the number of stainless steel coffee mugs FiWrt Corporation should plan on producing during the month of November, we need to consider the expected sales for November and December and FiWrt's policy for maintaining finished goods inventory.

Here's how we can calculate November's production:

1. Expected sales for November: 36,000 units 2. FiWrt wants to have an ending inventory equal to 30% of the next month's sales. The next month is December, with expected sales of 34,000 units. 3. Ending inventory for November required: 30% of 34,000 units = 0.30 * 34,000 = 10,200 units 4. This ending inventory for November will become the beginning inventory for December. 5. FiWrt also wants to maintain a beginning inventory for November, which is based on 30% of November's expected sales. 6. Beginning inventory for November: 30% of 36,000 units = 0.30 * 36,000 = 10,800 units (which is the ending inventory of October) 7. The production for November needs to cover the expected sales and provide an ending inventory for the next month. Therefore, we need to calculate production for November as follows: Production for November = expected sales for November + desired ending inventory for November - beginning inventory for November

8. Plug the numbers in:

Production for November = 36,000 units (November sales) + 10,200 units (December's desired ending inventory) - 10,800 units (November's beginning inventory) Production for November = 36,000 + 10,200 - 10,800 Production for November = 35,400 units

So, FiWrt should plan on producing 35,400 mugs during the month of November.

Extra: Understanding inventory levels and production planning is crucial for a business to meet demand without incurring extra costs from overproduction or downtime from underproduction. Companies like FiWrt use sales forecasts to make informed decisions. The policy of maintaining a specific percentage of the next month's estimated sales helps to buffer against fluctuations in demand and ensures that there are enough products on hand to meet customer needs without keeping too much capital tied up in inventory. However, it is also important for a company to accurately forecast sales to minimize storage costs and avoid stockouts, which can lead to lost sales. The goal of production planning is to create a balance between demand and supply while optimizing the use of resources.