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20 December, 06:07

A company budgeted unit sales of 320,000 units for January, 2016 and 315,000 units for February, 2016. The company has a policy of having an inventory of units on hand at the end of each month equal to 35% of next month's budgeted unit sales. If there were 62,150 units of inventory on hand on December 31, 2015, how many units should be produced in January, 2016 in order for the company to meet its goals?

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  1. 20 December, 06:23
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    Production for January 368,100

    Explanation:

    January Production:

    sales requirement 320,000

    desired ending inventory 35% of next month sales

    35% of february sales

    35% of 315,000 = 110,250

    Total needs 430,250

    beginning Inventory (62,150)

    Production for January 368,100

    Desired ending + sales is the amount we need to cover for january

    the beginning inventory are work already done to reach this need, so we subtract it.
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