Question

7 Houseman, Inc. anticipates sales of 60,000 units, 58,000 units, 61,000 units and 60,000 units in July, August, September and October, respectively. Company policy is to maintain an ending finished-goods inventory equal to 50% of the following month's sales. On the basis of this information, how many units would the company plan to produce in September?

Answer 1

60,500 units

Step-by-step explanation:

Data provided in the question:

Month sales

July 60,000 units

August 58,000 units

September 61,000 units

October 60,000 units

Ending inventory = 50% of the following month's sales

Now,

Total inventory required in September

= Sales in September + Ending inventory of September

= 61,000 units + 50% of sales in October

= 61,000 units + ( 0.50 × 60,000 )

= 61,000 units + 30,000 units

= 91,000 units

Number of units to be produced in September

= Total inventory required in September - Ending inventory of August

= 91,000 units - ( 50% of 61,000 )

= 91,000 units - 30,500 units

= 60,500 units