Question

Lesley is preparing the production budget for the next month. They are expecting a budgeted sales volume of 3,500 units for the month, with a targeted ending inventory of 10%. Currently, there are 215 units in the beginning inventory. How many units need to be produced to meet the budgeted sales volume?

Answer 1

Lesley needs to produce 3,635 units to meet the budgeted sales volume of 3,500 units and maintain a targeted ending inventory of 10%.

Step-by-step explanation:

To determine how many units need to be produced to meet the budgeted sales volume and targeted inventory levels, Lesley needs to accomplish a simple calculation. To meet a sales volume of 3,500 units and maintain an ending inventory that is 10% of that volume, Lesley needs to have 3,850 units available (3,500 units for sale + 350 units as ending inventory).

Since there are 215 units in the beginning inventory, Lesley needs to calculate the units to produce by subtracting the beginning inventory from the total units required. Therefore, Lesley needs to produce 3,850 units needed - 215 units beginning inventory = 3,635 units to be produced.