Question

The following forecasted sales pertain to Rapid City:

Month Unit Sales
June 32,000
July 40,000
August 24,000
September 30,000

Finished goods inventory as of May 31 6,000 units

Rapid City has a selling price of $5 per unit and expects to maintain ending inventories equal to 25 percent of next month's sales.

Required:
How many units are expected to be produced in June?

Answer 1

2,400 units

Step-by-step explanation:

Calculation of units expected to be produced in June is seen below;

= (Unit sales in June / Selling price per unit) + [(Unit sales in July/Selling price per unit) × Percentage of inventories] - Ending finished inventory

= ($32,000/$5) + [($40,000/$5) × 0.25] - 6,000

= 6,400 + 2,000 - 6,000

= 2,400 units

It is expected that 2,400 units would be produced in June.