Question

Flex-Tite manufactures plastic parts. The inventory policy at Flex-Tite is to hold inventory equal to 127% of the average monthly sales for its main product. Sales for the following year are expected to be 882,000 units. Based on the inventory policy, the budget calls for the production of 892,000 units.Required: What is the beginning inventory of the component?

Answer 1

Answer:

83,345  units

Explanation:

For computing the beginning inventory, first we have to determine the required inventory which is shown below:

Required inventory = (Expected sales units ÷ number of months in a year) × given percentage

= (882,000 units ÷ 12 months) × 127%

= 93,345 units

Now the beginning inventory would be

= Required inventory - (budget calls for the production - expected sales)

= 93,345 units - (892,000 units - 882,000 units)

= 93,345 units - 10,000 units

= 83,345  units