Question

Dug is a product of the Digby company. Digby's sales forecast for Dug is 506 units. Digby wants to have an extra 10% of units on hand above and beyond their forecast in case sales are better than expected. (They would risk the possibility of excess inventory carrying charges rather than risk lost profits on a stock out.) Taking current inventory into account, what will Dug's Production After Adjustment have to be in order to have a 10% reserve of units available for sale

Answer 1

556.6 or 557 units

Step-by-step explanation:

The computation of the production units is shown below:

Production units = Sales units × (1 + Reserve Percentage)

where,

Sales units is 506 units

And, the reserve percentage is 10%

So, the production units is

= 506 × 110%

= 556.6 or 557 units

We simply applied the above formula to find out the production units