Meridian Industries manufactures and sells two models of
watches, Prime and Luxuria. It expects to sell 3900 units of Prime
and 1600 units of Luxuria in 2016.The following estimates are given
for 2016:
Meridian had an inventory of 200 units of Prime and 75 units of
Luxuria at the end of 2015. It has decided that as a measure to
counter stock outages it will maintain ending inventory of 370
units of Prime and 250 units of Luxuria.
Each Luxuria watch requires one unit of Crimpson and has to be
imported at a cost of $10. There were 110 units of Crimpson in
stock at the end of 2015.The management does not want to have any
stock of Crimpson at the end of 2016.
How many units of Prime watches must be produced in 2016?
Calculation of Prime Watches that must be Produced in 2016:
Expected Sales of Prime Watches in 2016 = 3,900 Units
Beginning Inventory of Prime Watches for 2016 (Inventory at the of 2015) = 200 Units
Ending Inventory of Prime Watches for 2016 = 370 Units
Prime Watches that must be produced in 2016 = Expected Sales of Prime Watches in 2016 + Ending Inventory of Prime Watches for 2016 – Beginning Inventory of Prime Watches for 2016
Prime Watches that must be Produced in 2016 = 3,900 Units + 370 Units – 200 Units
Prime Watched that must be Produced in 2016 = 4,070 Units
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