A company's data is presented below.Desired ending inventory is a consistent percentage of the next quarter's sales and the previous year's fourth quarter ending inventory of 560 units meets this requirement.Compute the expected production in the third quarter of the current year. $$\begin{array} { l l l l l }
\text { Quarter } & 1 & 2 & 3 & 4 \
\text { Expected sales urits } & 7,000 & 5,000 & 8,000 & 6,000 \
\text { Urits produced } & 6,840 & ? & ? & ?
\end{array}$$
A)7,840
B)8,160
C)8,000
D)8,480
E)7,360

Question

A company's data is presented below.Desired ending inventory is a consistent percentage of the next quarter's sales and the previous year's fourth quarter ending inventory of 560 units meets this requirement.Compute the expected production in the third quarter of the current year. $$\begin{array} { l l l l l } 
\text { Quarter } & 1 & 2 & 3 & 4 \
\text { Expected sales urits } & 7,000 & 5,000 & 8,000 & 6,000 \
\text { Urits produced } & 6,840 & ? & ? & ?
\end{array}$$
A)7,840
B)8,160
C)8,000
D)8,480
E)7,360

Quizplus · Accepted Answer

The desired ending inventory is a consistent percentage of the next quarter's sales. Since the fourth quarter's ending inventory was 560 units, this means the desired ending inventory is 10% of the next quarter's sales (560 units is 10% of 5,600 units, which is 10% of 6,000 units). For the third quarter, the desired ending inventory is 10% of the fourth quarter's sales (6,000 units), which is 600 units. The beginning inventory for the third quarter is the ending inventory of the second quarter, which is 500 units (10% of 5,000 units). Therefore, the expected production for the third quarter is: Expected sales (8,000) + Desired ending inventory (600) - Beginning inventory (500) = 8,100 units.

A Company's Data Is Presented Below A)7,840 B)8,160 C)8,000 D)8,480 E)7,360

A Company's Data Is Presented Below A)7,840
B)8,160
C)8,000
D)8,480
E)7,360