Keegan Company manufactures a single product and has a JIT policy that ending inventory must equal 10% of the next month's sales. It estimates that May's ending inventory will consist of 20,000 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.
A) 288,000.
B) 260,000.
C) 289,000.
D) 280,000.
E) 309,000.

Question

Quizplus · Accepted Answer

To calculate the number of units to be produced in June, we first determine the desired ending inventory for June, which is 10% of July's sales (290,000 units). So, 10% of 290,000 = 29,000 units. Then, we add this to June's sales (280,000 units) and subtract May's ending inventory (20,000 units), which was June's beginning inventory. Therefore, units to be produced in June = (280,000 + 29,000) - 20,000 = 289,000 units.

Keegan Company Manufactures a Single Product and Has a JIT