BlueSteel makes premium quality filing cabinets. The firm has one factory with a production capacity of 10,000 cabinets per month. BlueSteel provides you with the following budgeted sales information in units by quarter. Furthermore, the firm expects to realize the same level of sales for each of the three months within each quarter.

Required:
a. On an annual basis, does BlueSteel have enough production capacity to meet its sales forecast?
b. Assume that BlueSteel begins the first quarter with zero inventory. Formulate a production budget consistent with its sales forecast.
c. The firm’s CEO is contemplating going to a “no inventory” policy because she is convinced that inventory just ties up valuable capital. Comment on the effect of this strategy on BlueSteel’s ability to meet next year’s anticipated sales.
d. What conclusions do you draw about the relation between capacity andinventory?

Transcribed Image Text:

QuarterQuarter 2 Quarter3 Quarter4 Sales for quarte 24,000 2800 33,000 27,000 9,000 Sales per month 8,000 9,500 11,000