Question

XYZ Co. has forecasted June sales of 800 units and July sales of 1,400 units. The...

XYZ Co. has forecasted June sales of 800 units and July sales of 1,400 units. The company maintains ending inventory equal to 125% of next month's sales. June beginning inventory reflects this policy. What is June's required production?

a) 1,500 units

b) 1,700 units

c) 1,550 units

d) 1,450 units

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Answer #1
Ans. Option c    1550 units
June
Expected units sales 800
Add: Desired ending inventory 1750
Total required units 2550
Less: Beginning inventory -1000
Units to be produced 1550
*Ending inventory of June = 125% of July sales
1400 * 125%
1750
(Beginning inventory of current month = Ending inventory of previous month.)
*Beginning inventory of June = Ending inventory of May = 125% of June's sales
800 * 125%
1000
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