Question
In: Finance
ABC Company plans to sell 500,000 units of finished product in July and anticipates a growth...
ABC Company plans to sell 500,000 units of finished product in July and anticipates a growth rate in sales of 10% per month. The desired monthly ending inventory in units of finished product is 65% of the next month's estimated sales. There are 355,000 finished units in inventory on June 30. Prepare the production requirement in units of finished product for the July-October.
Solutions
Expert Solution
As given in the question,
Sales for July is 500,000 and will grow 10% every month. Closing inventory of June is 355,000. Closing inventory is 65% of next month's sales.
We calculate the production requirement for the month as follows :-
Production = Sales + Closing inventory - Opening inventory
| Particulars | June | July | August | September | October | November |
| Opening Inventory | xxxxxxx | 3,55,000.00 | 3,57,500.00 | 3,93,250.00 | 4,32,575.00 | 4,75,832.50 |
| Production | xxxxxxx | 5,02,500.00 | 5,85,750.00 | 6,44,325.00 | 7,08,757.50 | xxxxxxx |
| Sales | xxxxxxx | 5,00,000.00 | 5,50,000.00 | 6,05,000.00 | 6,65,500.00 | 7,32,050.00 |
| Closing Inventory | 3,55,000.00 | 3,57,500.00 | 3,93,250.00 | 4,32,575.00 | 4,75,832.50 | xxxxxxx |
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