A company budgeted unit sales of 102,000 units for January, 2010 and 120,000 units for February, 2010. The company has a policy of having an inventory of units on hand at the end of each month equal to 30% of next month's budgeted unit sales. If there were 30,600 units of inventory on hand on December 31, 2009, how many units should be produced in January, 2010 in order for the company to meet its goals?
A) 107,400 units
B) 102,000 units
C) 96,600 units
D) 138,000 units

Question

Quizplus · Accepted Answer

To calculate the units to be produced in January, the formula is: January sales + ending inventory for January - beginning inventory for January. Ending inventory for January is 30% of February's sales (120,000 units), which is 36,000 units. Beginning inventory for January is 30,600 units. Therefore, units to be produced = 102,000 + 36,000 - 30,600 = 107,400 units.

A Company Budgeted Unit Sales of 102,000 Units for January