Question

Dell is a product of the Digby company. Digby's sales forecast for Dell is 2079 units. Digby wants to have an extra 10% of units on hand above and beyond their forecast in case sales are better than expected.
(They would risk the possibility of excess inventory carrying charges rather than risk lost profits on a stock out.)

Taking current inventory into account, what will Dell's Production After Adjustment have to be in order to have a 10% reserve of units available for sale?

a)2273 units

b)2287 units

c)2079 units

d)2065 units

Answer 1

Answer:

Option (B) is correct.

Explanation:

Sales forecast = 2079 units

Ending Inventory to be maintained:

= 10% of forecast sales

= 10% (2079 units)

= 208 units

Production:

= Sales + Ending Inventory - Beginning Inventory

= 2079 units + 208 units - Nil  

= 2,287 units

Taking current inventory into account, Dell's Production of 2,287 units After Adjustment have to be in order to have a 10% reserve of units available for sale.