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 find out how many units to produce in March, we need to first calculate the ending inventory for February, which will be 5% of March's sales. Then we can calculate the total number of units needed for March production.

March sales = 3,000 units 
Ending inventory for February = 5% of March sales = 0.05*3,000 = 150 units 
Total units needed for March = March sales + desired ending inventory - beginning inventory 
Beginning inventory is not given, so we assume it is zero. 
Total units needed for March = 3,000 + 150 - 0 = 3,150 units

Therefore, the answer is D) 2,990.

Cripe Corporation Maintains Ending Inventory for Each Month at 5