Spirit, Inc.budgeted sales are 433,000 units for January and 420,000 units for February.The company's policy requires maintaining units on hand at the end of each month equal to 8% of next month's budgeted unit sales.How many units should the company produce in January?

Question

Quizplus · Accepted Answer

Step 1: Calculate the units to be kept on hand at the end of January
8% of February's budgeted sales = 0.08 x 420,000 = 33,600 units

Step 2: Calculate the total units needed in January
Total units needed in February = Budgeted sales in February + units on hand in February
Total units needed in February = 420,000 + 33,600 = 453,600 units

Step 3: Calculate the units to be produced in January
Units to be produced in January = Total units needed in February - units on hand in January
Units to be produced in January = 453,600 - (0.08 x 433,000) = 431,960 units

Therefore, the best choice is D: 431,960 units.