The excess inventory stock is the amount of the units produced more than the demand of the product as a caution. For this a formula is used.
Answer: Production units = Sales * ( 1 + reserve percentage)
1853 * ( 1 + 10% ) = 2038 units.
Step-by-step explanation:
To have an excess inventory of the product Deal by the Digby company, the company has to make some extra units of the product. This is used as a caution in case forecast of the sales are better than the expected and that excess demand can be met.
The formula for excess inventory is :
Production units = Sales * ( 1 + Reserve percentage)
1853 * ( 1 + 10%) = 2038.
This is the amount of units the company should produce.