Question

Harwinton, Inc. anticipates sales of 56,000 units, 54,000 units, 57,000 units and 56,000 units in July, August, September and October, respectively. Company policy is to maintain an ending finished-goods inventory equal to 50% of the following month's sales. On the basis of this information, how many units would the company plan to produce in September?

Answer 1

The correct answer is 56,500 units.

Step-by-step explanation:

According to the scenario, the computation of the given data are as follows:

Sales for September = 57,000 units

As Beginning and ending inventory should be 50% of following month sales

So, Beginning inventory = 57,000 × 50% = 28,500

And Ending inventory = 56,000 × 50% = 28,000

So, we can calculate the units to be produce in September by using following formula:

Units produce in September = Sales for September + Ending inventory - Beginning inventory

By putting the value, we get

= 57,000 + 28,000 - 28,500

= 56,500 units