Universal Products has experienced a number of out-of-stock situations with resp

Question

Universal Products has experienced a number of out-of-stock situations with respect to its
            finished-goods inventories. Inventory at the end of June, for example, was only 400 units%u2014
an all-time low.

Management desires to implement a policy whereby finished-goods inventory is 60% of the following month's sales. Budgeted sales for July, August, and September are expected to be 3,600 units, 3,800 units, and 4,500 units, respectively.

Required:
Determine the number of units that Universal Products must produce in July and August.

Explanation / Answer

Hi,

Please find the answer as follows:

July = 3600 + .60*3800 - .60*3600 = 3720

August = 3800 + .60*4500 - .60*3800 = 4220

Thanks.

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