Truliant Co.sells a product called Withitall and has predicted the following sales for the first four months of the current year: Ending inventory for each month should be 20% of next month's sales.How many units should be produced in February?

Question

Truliant Co.sells a product called Withitall and has predicted the following sales for the first four months of the current year:  Ending inventory for each month should be 20% of next month's sales.How many units should be produced in February?

Quizplus · Accepted Answer

To calculate the production for February, we need to first calculate the sales forecast for March.

Sales forecast for March = 1,400 + 1,600 + 1,900 = 4,900

Ending inventory for March = 20% of 4,900 = 980

So, the total need for March is 4,900 + 980 = 5,880

Ending inventory for February = 20% of 4,900 = 980

So, the total need for February is 4,900 + 980 = 5,880 - 1,940 (January sales forecast) = 3,940

Beginning inventory for February = 20% of 4,900 = 980

So, the production for February = total need for February - beginning inventory for February = 3,940 - 980 = 2,960

Therefore, the answer is A) 1,940