The production budget shows that expected unit sales are 86,000 for May and 87,000 for June.The company desires to have units on hand at the end of the month equal to 10% of next month's sales.How many units should the company produce during May?
A)86,100
B)94,600
C)85,900
D)94,700

Question

Quizplus · Accepted Answer

The company wants to have 10% of next month's sales on hand at the end of the month. Next month's sales are expected to be 87,000 units. So, the company wants to have 10% of 87,000 units, or 8,700 units, on hand at the end of May. The company has 0 units on hand at the beginning of May. So, the company needs to produce 86,000 units in May to meet expected sales and have 8,700 units on hand at the end of the month.

The Production Budget Shows That Expected Unit Sales Are 86,000