Question

7 Houseman, Inc. anticipates sales of 60,000 units, 58,000 units, 61,000 units and 60,000 units in July, August, September and October, respectively. Company policy is to maintain an ending finished-goods inventory equal to 50% of the following month's sales. On the basis of this information, how many units would the company plan to produce in September?

Answer 1

Answer:

60,500 units

Explanation:

Data provided in the question:

Month            sales

July               60,000 units

August          58,000 units

September    61,000 units

October         60,000 units

Ending inventory = 50% of the following month's sales

Now,

Total inventory required in September

= Sales in September + Ending inventory of September

= 61,000 units + 50% of sales in October

= 61,000 units + ( 0.50 × 60,000 )

= 61,000 units + 30,000 units

= 91,000 units

Number of units to be produced in September

= Total inventory required in September  - Ending inventory of August

= 91,000 units - ( 50% of 61,000 )

= 91,000 units - 30,500 units

= 60,500 units