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 29,800 units. June and July sales are estimated to be 298,000 and 308,000 units, respectively. Compute the number of units to be produced that would appear on the company's production budget for the month of June.

Answer 1

299,000 units

Step-by-step explanation:

Given that,

June sales = 298,000 units

July sales = 308,000 units

Ending inventory = 10% of the next month's sales

Units to be produced in the month of June:

= Sales - Beginning inventory + Closing inventory

= Sales - (10% of June sales) + (10% of July sales)

= 298,000 - (0.1 × 298,000) + (0.1 × 308,000)

= 298,000 - 29,800 + 30,800

= 299,000

Therefore, the number of units to be produced that would appear on the company's production budget for the month of June is 299,00 units.