The following forecasted sales pertain to Alicia Company: $$\begin{array} { l r }
\text { Month } & \text { Sales } \
\text { April } & \$ 200,000 \
\text { May } & 250,000 \
\text { June } & 150,000 \
\text { July } & 100,000
\end{array}$$ Finished goods inventory as of March 31 4,000 units
The company has a selling price of $20 per unit and expects to maintain ending inventories equal to 20 percent of the next month's sales.
How many units are expected to be produced in April?
A)8,500 units
B)12,500 units
C)14,500 units
D)10,500 units

Question

The following forecasted sales pertain to Alicia Company: $$\begin{array} { l r } 
\text { Month } & \text { Sales } \
\text { April } & \$ 200,000 \
\text { May } & 250,000 \
\text { June } & 150,000 \
\text { July } & 100,000
\end{array}$$ Finished goods inventory as of March 31 4,000 units
The company has a selling price of $20 per unit and expects to maintain ending inventories equal to 20 percent of the next month's sales.
How many units are expected to be produced in April?
A)8,500 units
B)12,500 units
C)14,500 units
D)10,500 units

Quizplus · Accepted Answer

The correct answer is A because the company expects to maintain ending inventories equal to 20 percent of the next month's sales. Therefore, the ending inventory for April should be 20% of May's sales, which is $250,000 x 20% = $50,000. Since the selling price is $20 per unit, the ending inventory in units is $50,000 / $20 = 2,500 units. To calculate the number of units to be produced in April, we need to add the ending inventory for April to the sales for April. Therefore, the number of units to be produced in April is 2,500 units + 200,000 units / $20 = 8,500 units.

The Following Forecasted Sales Pertain to Alicia Company Finished Goods Inventory as of March 31 4,000 Units the

The Following Forecasted Sales Pertain to Alicia Company Finished Goods Inventory as of March 31 4,000 Units
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