Question

Deal is a product of the Digby company. Digby's sales forecast for Deal is 505 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 Deal's Production After Adjustment have to be in order to have a 10% reserve of units available for sale?

Answer 1

Production Units = 555.5 or 556 units

Step-by-step explanation:

Digby's Sales Forecast for Deal = 505 units.

Digby wants to have extra 10% of units = 100% + 10%

Taking current inventory into account? But, we don't know the current inventory in this question. So, We will calculate the that 10% extra only. If we knew the current inventory then we would have calculated after the adjustment of the current inventory.

Here's the formula to calculate the production units:

Production units = Number of Sales x (100% + Extra Units Percentage)

Production Units = 505 units x (100% + 10%)

Production Units = 505 units x 110%

Production Units = 555.5 or 556 units