Required informationSkip to questionJames Enterprises has budgeted unit sales for the next four months as follows: November 4,800 unitsDecember 5,800 unitsJanuary 6,400 unitsFebruary 5,200 unitsThe ending inventory for each month should be equal to 15% of the next month's sales in units. The inventory on October 31 was below this level and contained only 600 units.What are the total units to be produced in November?Multiple Choice4,530 units.5,670 units.5,070 units.5,890 units.
Question
Required informationSkip to questionJames Enterprises has budgeted unit sales for the next four months as follows: November 4,800 unitsDecember 5,800 unitsJanuary 6,400 unitsFebruary 5,200 unitsThe ending inventory for each month should be equal to 15% of the next month's sales in units. The inventory on October 31 was below this level and contained only 600 units.What are the total units to be produced in November?Multiple Choice4,530 units.5,670 units.5,070 units.5,890 units.
Solution
To find the total units to be produced in November, we need to consider the desired ending inventory for November and the beginning inventory.
The ending inventory for each month should be equal to 15% of the next month's sales in units. So, the ending inventory for November should be 15% of December's sales, which is 5,800 units.
15% of 5,800 units = 0.15 * 5,800 = 870 units
This is the desired ending inventory for November.
The beginning inventory for November is the ending inventory for October, which is given as 600 units.
The total units to be produced in November is therefore the sum of the desired sales for November and the desired ending inventory for November, minus the beginning inventory for November.
So, the total units to be produced in November = (November sales + Desired ending inventory for November) - Beginning inventory for November
= (4,800 units + 870 units) - 600 units
= 5,070 units
So, the total units to be produced in November is 5,070 units.
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