Question

A company budgeted unit sales of 204,000 units for January, 2020 and 240,000 units for February 2020. The company has a policy of having an inventory of units on hand at the end of each month equal to 30% of next month's budgeted unit sales. If there were 61,200 units of inventory on hand on December 31, 2019, how many units should be produced in January, 2020 in order for the company to meet its goals

Answer 1

Answer:

the number of units to be produced is 214,800 units

Explanation:

The computation of the number of units to be produced is given below;

= Budgeted units sales + required ending inventory - opening inventory

= 204,000 units + (240,000 units × 30%) - 61,200 units

= 204,000 units  + 72,000 units - 61,200 units

= 214,800 units

Hence, the number of units to be produced is 214,800 units

We simply applied the above formula so that the correct units could come