Shortie Company produces two products: X Brand and Y Brand. Budgeted sales for four months are as follows:
Shortie's ending inventory policy is that X Brand should have 10% of its next month's sales in ending inventory and Y Brand should have 20% of next month's sales in its ending inventory. On May 1, Shortie's inventory had 1,000 units of X Brand and 9,000 units of Y Brand.Y Brand requires four units of component A. (X Brand does not use component A.) On May 1, 2,100 units of component A were in inventory. Shortie wants to have 30% of the following month's production needs in inventory for component a. $\begin{array}{lll}&\text { X Brand }&Y \text { Brand }\
\text { May } & 10,000 & 40,000 \
\text { June } & 20,000 & 70,000 \
\text { July } & 15,000 & 80,000 \
\text { August } & 30,000 & 90,000
\end{array}$
-Refer to the Figure.What is the desired ending inventory of component A for May?

Question

Quizplus · Accepted Answer

The desired ending inventory of component A for May is calculated based on June's production needs for Y Brand, since Y Brand requires four units of component A per unit. June's sales for Y Brand are 70,000 units, and since Shortie wants to have 30% of the following month's production needs in inventory, we calculate the component A needed for June's production (70,000 units * 4 units of A = 280,000 units of A) and then 30% of that for the desired ending inventory for May, which is 280,000 * 30% = 84,000 units. However, the correct calculation should consider the ending inventory policy for Y Brand itself, which is 20% of July's sales (80,000 units * 20% = 16,000 units for July's beginning, which is June's ending). Therefore, the total units of Y Brand to be produced in June are 70,000 units + 16,000 units - 9,000 units (beginning inventory for May, which is the ending inventory for April) = 77,000 units. Thus, the component A needed for June's production is 77,000 units * 4 = 308,000 units, and 30% of that for the desired ending inventory for May is 308,000 * 30% = 92,400 units. The discrepancy in the final answer suggests a mistake in my calculation based on the provided choices, indicating a need to reevaluate the calculation steps or the interpretation of the question. Given the choices, none directly match the recalculated figure, suggesting a misunderstanding in the question's requirements or a miscalculation. The correct approach to find the desired ending inventory for component A for May should directly relate to the information provided and the choices given, focusing on the immediate requirements and policies stated in the question.

Shortie Company Produces Two Products: X Brand and Y Brand