Dryer Company's policy is to keep 25% of the next month's sales in ending inventory.If Dryer meets its ending inventory policy at the end of April and sales are expected to be 24,000 units in May and 41,000 units in June,how many units need to be produced in May?
A)19,750 units
B)28,250 units
C)40,250 units
D)34,250 units
E)None of the answer choices is correct.

Question

Quizplus · Accepted Answer

To calculate the units to be produced in May, first determine the ending inventory for May, which is 25% of June's sales (41,000 units), equaling 10,250 units. The beginning inventory for May is 25% of May's sales (24,000 units), equaling 6,000 units. The production needed is May's sales (24,000 units) plus ending inventory (10,250 units) minus beginning inventory (6,000 units), totaling 28,250 units.

Dryer Company's Policy Is to Keep 25% of the Next