Question

Sales for January are budgeted at 50,000 units, and the company expects sales to increase 4% each month. How many units will need to be purchased in February if the company's policy is to keep ending inventory each month at 10,000 units?

a. 52,000 units
b.54,000 units
c. 62,000 units
d. None of these answers is correct.

Answer 1

Units will need to be purchased in February are a. 52,000 units

Step-by-step explanation:

Sales for January are budgeted at 50,000 units, and the company expects sales to increase 4% each month.

Sales of February are budgeted = 50,000 + 50,000 x 4% = 52,000 units

Units will need to be purchased in February = Ending inventory in February + Units Sold of February - Beginning inventory in February.

The company's policy is to keep ending inventory each month at 10,000 units.

Therefore,

Ending inventory in February = Beginning inventory in February = Ending inventory in January = 10,000 units

Units will need to be purchased in February = 10,000 + 52,000 - 10,000 = 52,000 units