Deacon Inc. produces leather handbags. The production budget for the next four months is: July 5,350 units, August 6,940, September 7,950, October 8,080. Each handbag requires 0.4 square meters of leather. Deacon Inc.’s leather inventory policy is 45% of next month’s production needs. If the leather policy is met, what will the July 31 inventory be?
Calculation of Inventory as on July 31
Inventory policy = 45% of next month’s production needs
Production for August = 6,940 units
Leather required for production = 6,940 units * 0.40 square meter
= 2,776 square meter leather
Hence inventory as on July 31 = 2,776 square meter * 45%
= 1,249.20 square meter leather
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