Mr Lewis's Co has projected sales for the next four months as follows: Units January 70 000 February 90 000 March 55 000 April 65 000 Beginning inventory for the year is 47 000 units

Accounting Jan 23, 2021

Mr Lewis's Co has projected sales for the next four months as follows: Units January 70 000 February 90 000 March 55 000 April 65 000 Beginning inventory for the year is 47 000 units. Ending inventory for each month should be 30 per cent of the next month's sales. How many units should the company produce in January? 70 000 ??? 97 000 90 000 50 000

Expert Solution

Option D 50,000 units is correct

Using the standard equation, Sales = Opening balance + Production - Closing balance

=> Production = Sales + Closing balance - Opening balance

For January:

Opening balance = 47,000 units (Given)

Sales, projected = 70,000 units (Given)

Closing balance for January = 30% of Sales projected for February = 30% * 90,000 = 27,000 units

Production = 70,000 + 27,000 - 47,000 = 50,000 units

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