Question

trago company manufactures a single product and has a jit policy that ending inventory must equal 10% of the next month's sales. it estimates that may's ending inventory will consist of 29,600 units. june and july sales are estimated to be 296,000 and 306,000 units, respectively. compute the number of units to be produced in june.

Answer 1

To compute the number of units to be produced in June, we need to calculate the desired ending inventory for June and subtract it from the estimated June sales.

Let's break it down step by step:

1. Calculate the desired ending inventory for June:

June sales: 296,000 units

Desired ending inventory: 10% of June sales = 10% of 296,000 = 29,600 units

2. Calculate the number of units to be produced in June:

Desired production = Estimated June sales - Desired ending inventory

Desired production = 296,000 - 29,600 = 266,400 units

Therefore, Trago Company needs to produce 266,400 units in June to maintain their JIT policy with an ending inventory equal to 10% of the next month's sales.