Porcelain Interiors sells a variety of porcelain products including porcelain sinks. On December 31, the company had 75 sinks in inventory. The company's policy is to maintain a sink inventory equal to 10% of next month's expected sales. The company expects the following sales activity for the first quarter of the year: What is the projected production for February?

Question

Porcelain Interiors sells a variety of porcelain products including porcelain sinks. On December 31, the company had 75 sinks in inventory. The company's policy is to maintain a sink inventory equal to 10% of next month's expected sales. The company expects the following sales activity for the first quarter of the year:  What is the projected production for February?

Quizplus · Accepted Answer

To calculate the projected production for February, we first need to determine the desired level of inventory for that month. Since the expected sales for March are 1,600 sinks, the desired inventory level for that month is 160 (10% of 1,600). Therefore, the desired inventory level for February would be 75 + 160 = 235 sinks.

Next, we need to determine how many sinks need to be produced in order to reach that desired inventory level. To do this, we need to subtract the expected inventory at the end of January from the desired inventory level for February:

Desired inventory level for Feb - Expected inventory level for Jan = Sinks that need to be produced in February
235 - 120 = 115

Therefore, the projected production for February is 1,015 sinks (115 + expected sales for February, which is 900).

Porcelain Interiors Sells a Variety of Porcelain Products Including Porcelain