Question

A company budgeted unit sales of 320,000 units for January, 2016 and 315,000 units for February, 2016. The company has a policy of having an inventory of units on hand at the end of each month equal to 35% of next month's budgeted unit sales. If there were 62,150 units of inventory on hand on December 31, 2015, how many units should be produced in January, 2016 in order for the company to meet its goals?

Answer 1

Answer:

Production for January 368,100

Explanation:

January Production:

sales requirement    320,000

desired ending inventory 35% of next month sales

35% of february sales

35% of 315,000 =     110,250

Total needs              430,250

beginning Inventory (62,150)

Production for January 368,100

Desired ending + sales is the amount we need to cover for january

the beginning inventory are work already done to reach this need, so we subtract it.