Heedy Company is trying to decide how many units of merchandise to produce each month.The company policy is to have 20% of the next month's sales in inventory at the end of each month.Projected sales for August,September,and October are 30,000 units,20,000 units,and 40,000 units,respectively.How many units must be produced in September?
A) 24,000
B) 18,000
C) 28,000
D) 22,000

Question

Quizplus · Accepted Answer

To calculate the production for September, first determine the desired ending inventory for September, which is 20% of October's sales (40,000 units). So, 40,000 * 20% = 8,000 units. Add this to September's sales of 20,000 units, totaling 28,000 units needed for September. Subtract the beginning inventory for September, which is the ending inventory of August (20% of September's sales, 20,000 * 20% = 4,000 units), from the 28,000 units. Therefore, 28,000 - 4,000 = 24,000 units need to be produced in September.

Heedy Company Is Trying to Decide How Many Units of Merchandise