The sales budget for the Johnson Company indicates the following units to be sold: $$\begin{array} { l l }
\text { January } & 20,000 \
\text { February } & 30,000 \
\text { March } & 24,000 \
\text { April } & 28,000
\end{array}$$ The company requires that ending inventory be equivalent to 30% of the following month's sales.There were no units on hand at the end of December.What is the production that needs to take place during March?
A)24,000 units
B)102,000 units
C)25,200 units
D)32,400 units

Question

The sales budget for the Johnson Company indicates the following units to be sold: $$\begin{array} { l l } 
\text { January } & 20,000 \
\text { February } & 30,000 \
\text { March } & 24,000 \
\text { April } & 28,000
\end{array}$$ The company requires that ending inventory be equivalent to 30% of the following month's sales.There were no units on hand at the end of December.What is the production that needs to take place during March?
A)24,000 units
B)102,000 units
C)25,200 units
D)32,400 units

Quizplus · Accepted Answer

To calculate the production for March, we need to consider the sales for March and the required ending inventory for March, which is 30% of April's sales. Ending inventory for March = 30% of 28,000 = 8,400 units. Beginning inventory for March is the ending inventory of February, which is 30% of March's sales = 7,200 units. Production for March = Sales for March + Ending Inventory for March - Beginning Inventory for March = 24,000 + 8,400 - 7,200 = 25,200 units.