Question

Bioclean Co., a merchandiser, sells a biodegradable cleaning product and has predicted the following sales for the first four months of the current year: Jan. Feb. March April Sales in Units 1,800 2,000 2,200 1,700 Ending inventory for each month should be 30% of the next month's sales, and the December 31 inventory is consistent with that policy. How many units should be purchased in February?

Answer 1

Answer:

2,060 units

Explanation:

As we know thestock policy of the firm is the ending inventory for each month should be the 30 % of the next month's sales

In the case of february, following this policy:

• Starting inventory: is the same of ending inventory of the previous month: 0,3*2,000 (February´s sales) units= 600 units.
• Ending inventory= 0,3*2,200 (March´s sales) units= 660 units

Also, Ending Inventory (EI) is the result of the sum of Starting Inventory (SI) and  February Purchases (P) minus February Sales (S)

• EI= SI+P-S

We want to know P ( units Purchased), so:

P= EI-SI+S= 660-600+2,000=2060 units