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 calculate the ending inventory for each month, we need to first calculate the sales for the following month by multiplying the predicted sales by 1.05.

For example, the sales for February is 100,000 units, so the sales for March would be 1.05 * 100,000 = 105,000 units.

Using the same method, we can calculate the following sales:

- February sales: 100,000 units 
- March sales: 105,000 units 
- April sales: 110,250 units 
- May sales: 115,762.50 units

Now, to calculate the units that should be produced in March, we need to consider the following:

- Ending inventory for February: 5% of March sales = 5% * 105,000 = 5,250 units 
- Production needed for March sales: 105,000 units - ending inventory of 5,250 units = 99,750 units

Therefore, the answer is D) 2,990 units.

Cripe Corporation Maintains Ending Inventory for Each Month at 5