Reference no: EM132586203

Alvarez Company produces various parts used in the automotive industry. The sales budget for the next eight months is shown below:

Month         December           January          February           March         April        May        June        July

Units             25,000           27,000            32,000             28,500      31,400     34,500    36,700   35,000

Management of Alvarez has decided that the quantity of finished-goods inventory at the end of each month in 2018 is to be equal to 25 percent of the next month's budgeted unit sales.

Required:

Question ??a. What is needed is a production budget for January through June of 2018 (show months only)

Note: this is just the production budget (one table only), no materials budget, no disbursements budget!

Question b. Why do companies choose to produce units in advance for the coming period?

Question c. Why do companies choose to order materials in advance for the coming period?

Question d. Could innacurate prediction of the budget table above create problems for the company, how?