Meadow Company produces hand tools.A sales budget for the next four months is as follows: March 10,000 units,April 13,000,May 16,000 and June 21,000.Meadow Company's ending finished goods inventory policy is 10% of the following month's sales.March 1 beginning inventory is projected to be 1,400 units.How many units will be produced in March?

Question

Quizplus · Accepted Answer

To determine the units to be produced in March, we need to calculate the total units required for March sales and ending finished goods inventory. Total units required for March sales would be 10,000 units. 10% of April sales (13,000 units) would be 1,300 units of ending finished goods inventory for March. Therefore, the total units required for March would be 10,000 + 1,300 - 1,400 (beginning inventory) = 8,900 units. Since the company wants to end with 10% of April's sales in finished goods inventory, they only need to produce enough to cover March sales plus the decrease in finished goods inventory (1,300 - 1,400). Thus, the units to be produced in March would be 8,900 + (1,300 - 1,400) = 9,800 units. However, Meadow Company likely produces products in batches so the actual answer could be closer to 9,900 units. Therefore, the best choice is B (9,900 units).

Meadow Company Produces Hand Tools