Trago Company manufactures a single product and has a JIT policy that ending inventory must equal 5% of the next month's sales. It estimates that May's ending inventory will consist of 14,000 units. June and July sales are estimated to be 280,000 and 290,000 units, respectively.
- Compute the number of units to be produced that would appear on the company's production budget for the month of June.

Question

Quizplus · Accepted Answer

To calculate the number of units to be produced in June, we need to first calculate the desired ending inventory for June, which is 5% of July's sales or 5% of 290,000, which is 14,500 units.

Therefore, the total units required for June are:

Units required for June = June sales + desired ending inventory - May ending inventory 
Units required for June = 280,000 + 14,500 - 14,000 
Units required for June = 280,500

Hence, the number of units to be produced that would appear on the company's production budget for the month of June is 280,500 units, which is option D.

Trago Company Manufactures a Single Product and Has a JIT