Bombay Cabinet Store's policy is to keep 25% of the next month's sales in ending inventory.If sales are expected to be 5,000 units in March, 5,800 units in April, and 6,000 units in May, how many units should be produced in April?

Question

Quizplus · Accepted Answer

To calculate the production needed for April, we first need to calculate the ending inventory for March:

Ending inventory for March = 25% of April's sales = 0.25 x 5,800 = 1,450 units

To calculate the production needed for April, we need to add the ending inventory for March to the sales forecast for April, and then subtract the ending inventory for April:

Production needed for April = Sales forecast for April + Ending inventory for March - Ending inventory for April
Production needed for April = 5,800 + 1,450 - (0.25 x 6,000)
Production needed for April = 5,800 + 1,450 - 1,500
Production needed for April = 5,750 units

Therefore, the best choice is option D, which is 5,850 units.

Bombay Cabinet Store's Policy Is to Keep 25% of the Next