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PSYCHO15rus [73]
3 years ago
15

Trevor Company expects sales of Product W to be 60,000 units in April, 75,000 units in May, and 70,000 units in June. The compan

y desires that the inventory on hand at the end of each month be equal to 40% of the next month's expected unit sales. Due to excessive production during March, on March 31 there were 25,000 units of Product W in the ending inventory. Given this information, Trevor Company's production of Product W for the month of April should be:
Business
1 answer:
Sedbober [7]3 years ago
7 0

Answer:

65000 units

Explanation:

Given:

Expected sales of product W in April  = 60000 units

Expected sales of product W in May  = 75000 units

Expected sales of product W in June  = 70000 units

Inventory in hand at the end of each month = 40% of the next month's expected sale

Inventory expected at the end of the April = 40% of the expected sales in May

or

Inventory expected at the end of the April = 0.4 × 75000 = 30000 units

Therefore, the total units required in April =  Expected sales of product W in April + Inventory expected at the end of the April

or

the total units required in April = 60000 + 30000 = 90000 units

Now,

Excessive production in March (inventory) = 25000 units

Hence, the units required to be produced in April = the total units required in April - Excessive production in March (inventory)

or

the units required to be produced in April = 90000 - 25000 = 65000 units

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