A company's sales budget indicates the following sales: January: 25,000; February: 30,000; March: 35,000. Beginning inventory is 12,000 units and the company desires ending inventory of 45% of the next month's sales. Units to be produced in January will be .
Question
A company's sales budget indicates the following sales: January: 25,000; February: 30,000; March: 35,000. Beginning inventory is 12,000 units and the company desires ending inventory of 45% of the next month's sales. Units to be produced in January will be .
Solution
To calculate the units to be produced in January, we need to follow these steps:
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Calculate the desired ending inventory for January. This is 45% of February's sales, which is 30,000 units. So, 45/100 * 30,000 = 13,500 units.
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Add the desired ending inventory for January (13,500 units) to the sales for January (25,000 units). This gives us 38,500 units.
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Subtract the beginning inventory (12,000 units) from the total we just calculated (38,500 units).
So, the units to be produced in January = 38,500 units - 12,000 units = 26,500 units.
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