Question

Samuelson has a beginning inventory balance on January 1 of 12,000 units and desires an ending balance of 20% of the next month’s sales. If sales are expected to be 17,000 for January and 20,000 for February, what amount of units does Samuelson have to produce during the month of January?

A. 4,000 units

B. 9,000 units

C. 3,400 units

D. 8,400 units

Answer 1

Samuelson needs to produce 8,000 units during the month of January.

Step-by-step explanation:

To find the amount of units Samuelson needs to produce during the month of January, we need to calculate the desired ending balance.

The ending balance is 20% of the next month's sales, which would be 20% of 20,000 units for February, equaling 4,000 units. This means Samuelson wants to have 4,000 units left in inventory at the end of January.

To calculate how many units Samuelson needs to produce in January, we need to subtract the beginning inventory balance from the desired ending balance.

So, 4,000 units desired ending balance minus 12,000 units beginning inventory balance equals 8,000 units. Therefore, Samuelson needs to produce 8,000 units during the month of January.