Cripe Corporation maintains ending inventory for each month at 5% of the following month's sales.It predicted the following sales (in units) for the first four months of the coming year: How many units should be produced in March?

Question

Cripe Corporation maintains ending inventory for each month at 5% of the following month's sales.It predicted the following sales (in units) for the first four months of the coming year:  How many units should be produced in March?

Quizplus · Accepted Answer

To determine the units to be produced in March, we need to calculate the ending inventory for April, which is 5% of May's sales.

May's sales = 4,000 units

Ending inventory for April = 5% of 4,000 units = 200 units

Therefore, the total number of units required in April = predicted sales for May + ending inventory for April = 4,000 + 200 = 4,200 units

Similarly, the total number of units required in March = predicted sales for April + ending inventory for March

= 3,800 + 5% of 4,000 units

= 3,800 + 200 units

= 4,000 units

So, the units to be produced in March = total units required in March - ending inventory for February

= 4,000 units - 5% of 3,800 units

= 4,000 - 190

= 3,810 units

Therefore, the best choice is (D) 2,990.

Cripe Corporation Maintains Ending Inventory for Each Month at 5