Question

Marlow Company produces hand tools. A production budget for the next four months is as follows: March 10,300 units, April 13,300, May 16,500, and June 21,800. Marlow Company’s ending finished goods inventory policy is 10% of the following month’s sales. Marlow plans to sell 16,000 units in May. How many units will be sold in April?

Answer 1

Answer:

13,000 units

Explanation:

Given that,

Total production in April = 13,300 units

Total sales in May = 16,000 units

Ending finished goods inventory = 10% of the following month’s sales

Therefore, the number of units sold in April is determined by deducting ending finished goods inventory of April from the total production of units in April and beginning finished goods inventory.

Let the sales in April be x,

The beginning finished goods inventory of April is same as the ending inventory of March.

Ending finished goods inventory in March:

= 10% of sales in April

= 0.1 x

Ending finished goods inventory in April:

= 10% of sales in May

= 0.1 × 16,000 units

= 1,600 units

Therefore, the number of units in April is calculated as follows:

Ending inventory = Total production in April + Beginning inventory of April - Sales

1,600 units = 13,300 units + 0.1x - x

0.9x = 13,300 - 1,600

0.9x = 11,700

x = 13,000 units

Hence, the number of units sold in April is 13,000.