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Green company has budgeted sales of 23,000 units for June and 25,000 units for July. Green's...

Green company has budgeted sales of 23,000 units for June and 25,000 units for July. Green's policy is to maintain its finished goods inventory at 25% of the following month's sales. Accordingly, at the end of May, Green had 5,750 units on hand. How many units must it produce in June in order to support the sales goal and maintain its policy regarding finished goods inventory?

(The answer is 23,500 units but I dont know how they got this answer. Please show all work.)

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Answer #1

Computation the number of units produce in June is:

Number of units produce in June = Number of sales units in June + Number of finished good inventory at the ending - Number of finished good inventory at the beginning

= 23,000 units + 6,250 units - 5,750 units

= 23,500 units

Hence, the number of units produce in June is 23,500 units.

Working Note:

Computation the number of finished good inventory at the ending is:

Number of finished good inventory at the ending = Number of sales units in July * Percentage of finished good inventory

= 25,000 units * 0.25

= 6,250 units

Hence, the number of finished good inventory at the ending is 6,250 units.

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