A company has a sales forecast for the following five months as shown in the table. If they have a beginning inventory of 1225 units, what amount should be produced under a level plan in order for them to have an ending inventory of zero units at the end of the five-month period? $$\begin{array} { | l | c | }
\hline { \text { Month } } & \text { Forecast } \
\hline \text { Tanuary } & 1575 \
\hline \text { February } & 1420 \
\hline \text { March } & 1680 \
\hline \text { April } & 1750 \
\hline \text { May } & 1975 \
\hline
\end{array}$$
A)1,435 units per month
B)1,595 units per month
C)1,385 units per month
D)1,515 units per month

Question

A company has a sales forecast for the following five months as shown in the table. If they have a beginning inventory of 1225 units, what amount should be produced under a level plan in order for them to have an ending inventory of zero units at the end of the five-month period? $$\begin{array} { | l | c | } 
\hline  { \text { Month } } & \text { Forecast } \
\hline \text { Tanuary } & 1575 \
\hline \text { February } & 1420 \
\hline \text { March } & 1680 \
\hline \text { April } & 1750 \
\hline \text { May } & 1975 \
\hline
\end{array}$$
A)1,435 units per month
B)1,595 units per month
C)1,385 units per month
D)1,515 units per month

Quizplus · Accepted Answer

The level production rate is calculated as the average of the beginning inventory plus the forecasted demand over the planning period. In this case, the average demand is (1575 + 1420 + 1680 + 1750 + 1975) / 5 = 1600 units. The beginning inventory is 1225 units. Therefore, the level production rate is (1225 + 1600) / 5 = 1435 units per month.

A Company Has a Sales Forecast for the Following Five