Question

Dart is a product of the Digby company. Digby's sales forecast for Dart is 506 units....

Dart is a product of the Digby company. Digby's sales forecast for Dart is 506 units. Digby wants to have an extra 10% of units on hand above and beyond their forecast in case sales are better than expected. (They would risk the possibility of excess inventory carrying charges rather than risk lost profits on a stock out.) Taking current inventory into account, what will Dart's Production After Adjustment have to be in order to have a 10% reserve of units available for sale?

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361 units
412 units
557 units
506 units
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Answer #1

The correct answer is the third option showing 557.

Digby's sales forecast for Dart is 506 units. Digby wants to have an extra 10% of units on hand above and beyond their forecast in case sales are better than expected.

Taking current inventory into account, Dart's Production After Adjustment will have to be, in order to have a 10% reserve of units available for sale = 506 x 10% x 506 = 506 + 50.6 =556.6 = 557 units

Hence, the correct answer is the third option showing 557.

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