$\begin{array}{lrr}&\text { SR200 }&TX 500\
\text { May } & 8,000 & 20,000 \
\text { June } & 13,000 & 32,000 \
\text { July } & 11,000 & 39,000 \
\text { August } & 18,000 & 46,000
\end{array}$ Kenner's ending inventory policy is that SR200 should have 15% of next month's sales in ending inventory and TX500 should have 40% of next month's sales in ending inventory. On May 1, there were 1,200 units of SR200 and 9,000 units of TX500.TX500 requires 6 units of component A. (SR200 does not use component A.) There were 30,000 units of component A in inventory on May 1. Kenner wants to have 20% of the following month's production needs in inventory for Component A.
-Refer to Figure 9-2. What is the desired ending inventory of component A for May?

Question

Quizplus · Accepted Answer

To calculate the desired ending inventory of component A for May, we first need to determine the production needs for TX500 in June, since the policy is to have 20% of the following month's production needs in inventory. For June, TX500 sales are projected to be 32,000 units, and the ending inventory policy requires 40% of the next month's (July's) sales in ending inventory, which is 0.40 * 39,000 = 15,600 units. The total needs for June are the sum of June sales and the desired ending inventory for June, minus the beginning inventory for June (which is the desired ending inventory for May). The beginning inventory for May for TX500 is 9,000 units, and the desired ending inventory for May is 40% of June's sales, which is 0.40 * 32,000 = 12,800 units. Thus, the total needs for June are 32,000 (June sales) + 15,600 (desired ending inventory for June) - 12,800 (beginning inventory for June, which is the desired ending inventory for May) = 34,800 units. Since each unit of TX500 requires 6 units of component A, the total component A needed for June's production is 34,800 * 6 = 208,800 units. The desired ending inventory of component A for May is 20% of this amount, which is 0.20 * 208,800 = 41,760 units.

Kenner's Ending Inventory Policy Is That SR200 Should Have 15