Question

Alta Vista Company plans to sell 90,000 units in June and 135,000 units in July. The company’s policy is to keep 15% of the next month's sales in ending inventory. If the ending inventory in May was consistent with this policy, how many units should be produced in June?

Answer 1

Answer:

96,750 units.

Step-by-step explanation:

Alta Vista Company plans to sell 90,000 units in June.

Ending inventory in May equals to 15% of the next month's sale (90,000)

Inventory having may ending = 15% × 90,000

                                                 = 0.15 × 90,000

                                                 = 13,500

Inventory required to produce in June month

= 90,000 - 13,500 + 15% of July month sales

= 76,500 + 15% × 135,000

= 76,500 + 20,250

= 96,750

96,750 units should be produced in June.