Question

roger company sells 50,000 units of product R in the first quarter. 40,000 units in the second quarter and 30,000 units in the third quarter. Quarter ending inventory is determined to be 20% of next quarter sales. How many units would Roger need to produce in the second quarter

a) 38000

b) 40,000

c) 48,000

d) 42,000

Answer 1

Solution

Closing inventory of 1st quarter is 8000 units i.e. 20% of next quarter sales (40000*20%).

Now Opening inventory of 2nd quarter is 8000 units i.e. closing of 1st quarter, closing inventory of 2nd quarter is 6000 units i.e. 20% of next quarter sales (30000*20%) & sales for the quarter is 40000 units.

So unit required to produce in the second quarter is as follows:-

Required unit = (Sale+ Closing inventory) - opeing inventory

= (40000+6000) - 8000

= 38000

So, the correct option is "a" i.e. 38000 units.

Thank You.

Hope for the positive response.