A company budgeted unit sales of 204,000 units for January, 2013 and 240,000 units for February 2013.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 61,200 units of inventory on hand on December 31, 2012, how many units should be produced in January, 2013 in order for the company to meet its goals?
A)214,800 units
B)204,000 units
C)193,200 units
D)276,000 units

Question

Quizplus · Accepted Answer

To calculate the units to be produced in January, 2013, we need to consider the desired ending inventory for January and the beginning inventory. The ending inventory for January should be 30% of February's sales, which is 30% of 240,000 = 72,000 units. The beginning inventory is 61,200 units. Therefore, the units to be produced = January sales + ending inventory - beginning inventory = 204,000 + 72,000 - 61,200 = 214,800 units.

A Company Budgeted Unit Sales of 204,000 Units for January