Question

Heedy Company is trying to decide how many units of merchandise to produce each month.The company policy is to have 20% of the next month's sales in inventory at the end of each month.Projected sales for August, September, and October are 30,000 units, 20,000 units, and 40,000 units, respectively.How many units must be produced in September?A) 24,000B) 18,000C) 28,000D) 22,000

Answer 1

Answer:

Production= 24,000 units

Explanation:

Giving the following information:

Desired ending inventory= 20% of next month's sales

Sales:

August= 30,000

September= 20,000

October= 40,000

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

Production= sales + desired ending inventory - beginning inventory

Production= 20,000 + 40,000*0.2 - 20,000*0.2

Production= 24,000 units