Fill in the Blank QuestionFill in the blank 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 .
Question
Fill in the Blank QuestionFill in the blank 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 find out how many units need to be produced in January, we need to follow these steps:
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First, we need to calculate the desired ending inventory for January. The company wants this to be 45% of the next month's sales. Since February's sales are projected to be 30,000 units, the desired ending inventory for January would be 45/100 * 30,000 = 13,500 units.
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Next, we need to add this desired ending inventory to the sales expected in January. So, 25,000 (January sales) + 13,500 (desired ending inventory) = 38,500 units. This is the total number of units that the company needs to have on hand in January.
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However, the company already has a beginning inventory of 12,000 units. So, we subtract this from the total number of units needed to find out how many units need to be produced. So, 38,500 - 12,000 = 26,500 units.
Therefore, the company needs to produce 26,500 units in January.
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