Question

ABC Company plans to sell 6,700 units of its product in May. The company has 1,200 units in its May 1 finished-goods inventory and anticipates having 1,500 completed units in inventory on May 31. Based on the above information, how many units will the company produce in May

Answer 1

Answer:

Total units to be produced 7,000

Explanation:

To solve this problem we use the inventory identity

beginning + production = ending + sales

production = ending + sales - beginning

Sales for the period 6,700

Desired Ending Inventory 1,500

Total units requirement for May 8,200

Beginning Inventory (1,200)

Total units to be produced 7,000

Also, with common sense we can understand that sales and ending inventory is all we need to cover.

The beginning inventory are units already made to reach our goal, so it decrease our productions needs.