Homestyle Interiors sells a variety of home furnishings including sleeper sofas. On March 31, the company had 225 sofas in inventory. The company's policy is to maintain a sleeper sofa inventory equal to 15% of next month's expected sales. The company expects the following sales activity for the second quarter of the year: What is the projected production for May?

Question

Homestyle Interiors sells a variety of home furnishings including sleeper sofas. On March 31, the company had 225 sofas in inventory. The company's policy is to maintain a sleeper sofa inventory equal to 15% of next month's expected sales. The company expects the following sales activity for the second quarter of the year:  What is the projected production for May?

Quizplus · Accepted Answer

First, we need to calculate the required inventory for May. 
Expected sales for May = 9,400 x 0.40 = 3,760 
Required inventory for May = 3,760 x 0.15 = 564

To determine the projected production for May, we need to calculate the change in inventory from April to May:

225 (current inventory) + P (production in May) - 564 (required inventory for May) = X (required inventory for April)

Simplifying the equation:

P = X - 225 + 564 
P = 1,615

Therefore, the projected production for May is 1,615 sofas, which is option D.

Homestyle Interiors Sells a Variety of Home Furnishings Including Sleeper