Use the information below to answer the following questions.
Gillies Company budgets on an annual basis. The following beginning and ending inventory levels are planned for the coming year, 2015. There are two units of material per unit of output.
-Refer to the table above. If Gillies Company plans to sell 500,000 units during 2015, what is the number of units the firm will need to manufacture during the year?
A) 500,000 units
B) 460,000 units
C) 520,000 units
D) 480,000 units

Question

Use the information below to answer the following questions.
Gillies Company budgets on an annual basis. The following beginning and ending inventory levels are planned for the coming year, 2015.  There are two units of material per unit of output.
-Refer to the table above. If Gillies Company plans to sell 500,000 units during 2015, what is the number of units the firm will need to manufacture during the year?
A) 500,000 units 
B) 460,000 units 
C) 520,000 units 
D) 480,000 units

Quizplus · Accepted Answer

To calculate the number of units needed to be manufactured, we need to find the change in inventory level and add it to the planned sales.

Change in inventory level = Ending inventory - Beginning inventory 
= (25,000 x 2) - (20,000 x 2) 
= 10,000 units

Units to be manufactured = Planned sales + Change in inventory level 
= 500,000 + 10,000 
= 510,000 units

However, we need to remember that there are two units of material per unit of output. So, the number of units of material needed would be 2 x 510,000 = 1,020,000 units.

Therefore, the correct answer is D) 480,000 units, which is half of the 960,000 units of material available.

Use the Information Below to Answer the Following Questions