Question

Using the cut-and-try method for aggregate operations planning, we can back calculate beginning inventory if we knew the values of other relevant variables. What should have been the initial inventory in units of demand, if the production requirement in units of product is 900, demand forecast is 1,000, and the necessary safety stock is 20 percent of the demand forecast, Choose the right answer for the beginning inventory.

Answer 1

Beginning inventory must have been 300.

The entire dollar amount of stock goods that are available for use or sale at the beginning of an accounting period is known as beginning inventory. Beginning inventory, also known as starting inventory, is the same as ending inventory from the preceding accounting period.

There are four basic categories of inventory:

• finished items,
• MRO,
• WIP,
• and raw materials/components.

Businesses may better plan, budget, and forecast by understanding sales trends with the aid of beginning inventory.

For internal accounting records like income statements, beginning inventory provides information about the stock's valuation. With the following aspects, it aids in e-commerce bookkeeping: Determine any potential inconsistencies and inventory loss.

the difference in demand and the closing inventory

= 1000 - 900

= 100

And 20% of the demand (2000) = 200

the safety stock = 200 + 100

                         = 300

Therefore, the beginning inventory is 300.

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