In order to estimate production requirements, we
A) subtract projected sales in units from desired ending inventory and add beginning inventory.
B) add projected sales in units to desired ending inventory and subtract beginning inventory.
C) add beginning inventory to desired ending inventory and divide by two.
D) add beginning inventory to desired ending inventory and subtract projected sales in units.

Question

Quizplus · Accepted Answer

We need to know how much products we need to produce to meet the sales demand while maintaining a desired inventory level. Therefore, we need to add the projected sales in units to the desired ending inventory and subtract the beginning inventory. This will give us the production requirement for the given period. Option A is incorrect as it subtracts projected sales from desired ending inventory which are both quantities that need to be produced/maintained. Option C takes the average of beginning and desired ending inventory which does not give an accurate estimate of production requirements. Option D subtracts sales from inventory which is not what is required to estimate production requirements.

In Order to Estimate Production Requirements, We