Answer:
Step-by-step explanation:
Management desires an ending inventory each quarter equal to 40% of the next quarter’s sales so the closing inventory 2040 is the 40% of 1st quarter 2017 (Jan-Mar).
40% = 2040
Reverse the 40% in to 100 to find the 100% forecasted sales for QTR-1
we have:
100% = 2040/40%
100% = 5100 is the 1st quarter sale
40% ending inventory = 2040
Total production for quarter-1 = 5100+2040 = 7140
Total production for quarter-2 = 5100+2040 = 7140
Total production for quarter-3 = 5100+2040 = 7140
production for the first three quarter will remain the same but in 4th quarter it will change because the sale for the qrt-1 of 2018 is expected to be increased by 25%, so the production of Qrt-4 of 2017 is as follows:
will multiply the total quarterly sales with 1.25 i.e 100+25%
Quarter-4 sale = 5100*1.25 = 6375
closing inventory 40%=6375*40% = 2550
Qrt-4 production = Quarter-4 sale = 5100 +2550
Qrt-4 production = 7650
Total production for 2017 = 7140+7140+7140+7650
Total production for 2017 = 29070