Question

Answer the following questions using the information below:

Meridian Industries manufactures and sells two models of watches Prime and Luxuria. It expects to sell 3,000 units of Prime and 1,000 units of Luxuria in 2016.The following estimates are given for 2016:

Prime Luxuria
Selling price $200 $500
Direct materials 20 50
Direct labor 40 150
Manufacturing overhead 40 100

Meridian had an inventory of 200 units of Prime and 75 units of Luxuria at the end of 2015. It has decided that as a measure to counter stock outages it will maintain ending inventory of 350 units of Prime and 200 units of Luxuria.

Each Luxuria watch requires one unit of Crimpson and has to be imported at a cost of $10. There were 100 units of Crimpson in stock at the end of 2015.The management does not want to have any stock of Crimpson at the end of 2016.

*39) How many units of Prime watches must be produced in 2016?*
A) 3,350 units
B) 3,150 units
C) 3,000 units
D) 2,800 units

Answer 1

Meridian Industries needs to produce 3,150 units of Prime watches in 2016 to meet the expected sales and ending inventory requirements.

Step-by-step explanation:

To determine how many units of Prime watches must be produced in 2016, we need to calculate the required production based on the estimated sales and desired ending inventory levels.

The company expects to sell 3,000 units of Prime, wants to end with an inventory of 350 units of Prime, and had an opening inventory of 200 units of Prime at the end of 2015. To find the production amount, we use the following formula: Production = Sales + Ending Inventory - Beginning Inventory. Plugging in the numbers, we get 3,000 + 350 - 200 = 3,150 units of Prime that need to be produced in 2016.

Therefore, the correct answer is B) 3,150 units.