Question

Houseman, Inc. anticipates sales of 57,000 units, 55,000 units, and 58,000 units in July, August, and September, respectively. Company policy is to maintain an ending finished-goods inventory equal to 20% of the following month's sales. On the basis of this information, how many units would the company plan to produce in July?

Answer 1

Answer:

56,600 units

Explanation:

The computation of the units produced is shown below:

= Budgeted sales units + Desired ending inventory units - Beginning inventory  units

= 57,000 units + (55,000 units × 20%) - (57,000 units × 20%)

= 57,000 units + 11,000 units - 11,400 units

=  56,600 units

Since in the question it is given that 20% of ending inventory is equal to the following month sales and the same is applied here also.