General Corporation manufactures boxes.The estimated number of boxes sold for the first three months of 2011 are as follows: Finished goods inventory at the end of December was 900 units.Ending finished goods inventory is equal to 20 percent of the next month's sales.General Corporation expects to sell the boxes for $5 each.April 2011 sales is projected at 4,500 boxes.
-
How many boxes should be produced in January?
A) 3,060 boxes
B) 2,940 boxes
C) 3,000 boxes
D) 3,840 boxes

Question

General Corporation manufactures boxes.The estimated number of boxes sold for the first three months of 2011 are as follows:  Finished goods inventory at the end of December was 900 units.Ending finished goods inventory is equal to 20 percent of the next month's sales.General Corporation expects to sell the boxes for $5 each.April 2011 sales is projected at 4,500 boxes.
-
How many boxes should be produced in January?
A) 3,060 boxes 
B) 2,940 boxes 
C) 3,000 boxes 
D) 3,840 boxes

Quizplus · Accepted Answer

We can calculate the required production for each month using the following formula:
Required Production = Expected Sales + Ending Inventory - Beginning Inventory

For January 2011:
Expected Sales = 10,000 boxes
Ending Inventory = 20% of February's expected sales = 2,000 boxes
Beginning Inventory = 900 boxes (given)

Therefore, Required Production = 10,000 + 2,000 - 900 = 11,100 boxes
However, we need to deduct the April sales projection of 4,500 boxes, as these are not relevant for January's production.

Adjusted Required Production = Required Production - April Sales Projection
= 11,100 - 4,500 = 6,600 boxes

But, we also need to consider the production capacity of the company. Let's assume that the company can produce a maximum of 3,000 boxes per month.

Therefore, the best choice for January's production is B) 2,940 boxes, which is the closest possible quantity to the adjusted required production within the production capacity of the company.

General Corporation Manufactures Boxes