Question

M Corporation produces and sells Product D. To guard against stockouts, the company requires that 25% of the next month's sales be on hand at the end of each month. Budgeted sales of Product D over the next four months are:
June July August September
Budgeted sales in units 40,000 60,000 50,000 80,000
Budgeted production for August would be:__________.
A. 77,000 units
B. 80,000 units
C. 57,500 units
D. 107,000 units

Answer 1

Answer:

Production= 57,500 units

Explanation:

Giving the following information:

To guard against stockouts, the company requires that 25% of the next month's sales be on hand at the end of each month.

To calculate the production for July, we need to use the following formula:

Production= sales + desired ending inventory - beginning inventory

Production= 60,000 + (0.25*50,000) - (0.25*60,000)

Production= 57,500 units