Question

ABC Inc.'s expected sales for the first six months of the year are:

Jan- 12,000
Feb- 15,000
Mar- 16,000
Apr- 20,000
May- 22,000
Jun- 25,000
If desired ending inventory is 25% of next month's sales, the number of units produced in March is:

Answer 1

To calculate the number of units produced in March, we add March's expected sales of 16,000 units to the desired ending inventory of 5,000 units (which is 25% of April’s sales of 20,000 units). With no beginning inventory provided, ABC Inc. needs to produce 21,000 units in March.

Step-by-step explanation:

To calculate the number of units ABC Inc. needs to produce in March, we must take into account the sales forecast for April, since the desired ending inventory for March is 25% of April's sales. Since April's expected sales are 20,000 units, 25% of that would be 5,000 units, which ABC Inc. would want as ending inventory for March. Therefore, to find the total units needed for March, we add March's expected sales to the desired ending inventory and subtract any beginning inventory (assuming there is none since it was not provided).

The calculation is as follows:

• March sales: 16,000 units
• Desired ending inventory for March (25% of April sales): 5,000 units
• March beginning inventory: 0 units (not provided, assuming none)

Units to be produced in March = March sales + Desired ending inventory for March - March beginning inventory

= 16,000 + 5,000 - 0

= 21,000 units