Walsh Company expects sales of Product W to be 60,000 units in April,75,000 units in May,and 70,000 units in June.The company desires that the inventory on hand at the end of each month be equal to 40% of the next month's expected unit sales.Due to excessive production during March,there were 25,000 units of Product W in the ending inventory on March 31.Given this information,what should be Walsh Company's production of Product W for the month of April?
A) 60,000 units.
B) 65,000 units.
C) 66,000 units.
D) 75,000 units.

Question

Quizplus · Accepted Answer

To determine the required production of Product W for April, we need to calculate the desired ending inventory for April and subtract it from the expected sales for May.

1. Desired ending inventory for April: 
40% of May sales = 0.4 x 75,000 = 30,000 units

2. Subtract desired ending inventory from May sales to determine required production for April: 
75,000 - 30,000 = 45,000 units

However, we also need to take into account the 25,000 units of Product W that are already in the ending inventory on March 31. This means that Walsh Company does not need to produce 45,000 units from scratch, but rather only needs to produce enough to bring the total inventory up to the desired level.

3. Adjust required production for April based on the existing inventory: 
45,000 - 25,000 = 20,000 units

Therefore, the best choice is B) 65,000 units, which represents the sum of the existing inventory and the required production for April: 
25,000 + 20,000 = 65,000 units.

Walsh Company Expects Sales of Product W to Be 60,000