Douglas Corporation plans to sell 24,000 units of Product A during July and 30,000 units during August.Sales of Product A during June were 25,000 units.Past experience has shown that end-of-month inventory should equal 3,000 units plus 30% of the next month's sales.On June 30 this requirement was met.Based on these data, how many units of Product A must be produced during the month of July?

A) 28,800
B) 22,200
C) 24,000
D) 25,800

Question

Parker Jilke · Accepted Answer

Final Answer : D, Explanation :  To determine how many units of Product A must be produced during July, we need to calculate the desired end-of-month inventory for August.End-of-month inventory for August = 3,000 + 30% of 30,000 units (next month's sales) = 12,000Next, we need to determine the total number of units that will be required during August:Total units required for August = Sales in August (30,000) + Desired end-of-month inventory (12,000) - Beginning inventory (which is the end-of-month inventory for July):Total units required for August = 30,000 + 12,000 - 3,000 - 30% of 30,000 (since the end-of-month inventory for July was met)Total units required for August = 30,000 + 12,000 - 3,000 - 9,000 = 30,000So, in order to meet the total demand for August, Douglas Corporation needs to produce 30,000 units of Product A in July. Therefore, the answer is D) 25,800.

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