XYZ Co. has forecasted June sales of 400 units and July sales of 700 units. The company maintains ending inventory equal to 125% of next month's sales. June beginning inventory reflects this policy. What is June's required production?
A)750 units
B)0 units
C)775 units
D)425 units

Question

Quizplus · Accepted Answer

To calculate the required production for June, we need to first calculate the ending inventory for July. July sales are forecasted to be 700 units, so the ending inventory for July will be 125% of 700, which is 875 units. Since ending inventory for July is equal to June's production, plus June's beginning inventory, minus June's sales, we can use this formula to solve for June's required production:

875 = X + (400*1.25) - 400
875 = X + 500 - 400
875 = X + 100
X = 775

Therefore, the required production for June is 775 units.

XYZ Co Has Forecasted June Sales of 400 Units and July