Question

# Schrank Company is trying to decide how many units of merchandise to order each month. The...

Schrank Company is trying to decide how many units of merchandise to order each month. The company's policy is to have 15% of the next month's sales in inventory at the end of each month. Projected sales for August, September, and October are 46,000 units, 36,000 units, and 56,000 units, respectively. How many units must be purchased in September?

Projected sales for August = 46,000 units.

Projected sales for September = 36,000units

Projected sales for October = 56,000units

It is given that company's policy is to maintain 15% of the next month's sales in inventory at the end of each month.

Then ,

In the month of september the company will have 15% of 56,000 units in inventory for the sales of October

15% of 56,000 = 8,400 units

In the same way , 15% of the September units will be there in August , so in the month of September the Schrank Company will have the remaining 85% of the total units + 8,400 units.

So in September ,Schrank Company should purchase 85% of 36,000 + 8,400 = 39,000 units