Noel Enterprises has budgeted sales in units for the next five months as follows:
$\begin{array} {| l | r |}
\hline \text { January } & 6,800 \text { units } \
\hline \text { February } & 5,400 \text { units } \
\hline \text { March } & 7,200 \text { units } \
\hline \text { April } & 4,600 \text { units } \
\hline \text { May } & 3,800 \text { units } \
\hline
\end{array}$Past experience has shown that the ending inventory for each month must be equal to 10% of the next month's sales in units. The inventory on December 31 contained 400 units. The company needs to prepare a production budget for the second quarter of the year.

-What is the opening inventory in units for April?

Question

Noel Enterprises has budgeted sales in units for the next five months as follows:
$\begin{array} {| l | r |} 
\hline \text { January } & 6,800 \text { units } \
\hline \text { February } & 5,400 \text { units } \
\hline \text { March } & 7,200 \text { units } \
\hline \text { April } & 4,600 \text { units } \
\hline \text { May } & 3,800 \text { units } \
\hline
\end{array}$Past experience has shown that the ending inventory for each month must be equal to 10% of the next month's sales in units. The inventory on December 31 contained 400 units. The company needs to prepare a production budget for the second quarter of the year.

-What is the opening inventory in units for April?

Quizplus · Accepted Answer

The opening inventory for April is equal to 10% of April's sales, which are based on May's sales (3,800 units). 10% of 3,800 units is 380 units, but the question asks for the opening inventory for April, which is actually the ending inventory of March. Since March's sales are 7,200 units, 10% of this is 720 units, which should be the ending inventory for March and thus the opening inventory for April. However, due to a misunderstanding in the explanation, the correct calculation based on the question's data indicates that the opening inventory for April should indeed be based on 10% of May's sales, which is 380 units, making the initial explanation incorrect. The correct answer is that the opening inventory for April is determined by the ending inventory requirement for March, which is 10% of April's sales, not May's. This was an error in interpreting the question's requirements. The correct approach is to calculate the ending inventory for March as 10% of April's sales (4,600 units), which equals 460 units. Therefore, the opening inventory for April is 460 units.

Noel Enterprises Has Budgeted Sales in Units for the Next