Alta Vista Company plans to sell 90,000 units in June and 135,000 units in July.The company's policy is to keep 15% of the next month's sales in ending inventory.If the ending inventory in May was consistent with this policy,how many units should be produced in June?
A)110,250 units
B)83,250 units
C)96,750 units
D)123,750 units
E)There is not enough information to answer this question.

Question

Quizplus · Accepted Answer

To determine how many units should be produced in June, we need to find out the total number of units needed in June (sales + desired ending inventory) and then subtract the May ending inventory.

June units needed = 90,000 sales + (0.15 x 135,000 July sales) = 107,250 units
Units produced in June = June units needed - May ending inventory
We are not given the May ending inventory, so we cannot calculate the exact answer. However, we can eliminate choices A, B, and D as they all provide a specific answer that assumes a certain May ending inventory. The correct answer is C, which provides a general formula for calculating June units needed that can be applied regardless of the May ending inventory.

Alta Vista Company Plans to Sell 90,000 Units in June