A company budgeted unit sales of 274000 units for January, 2017 and 310000 units for February 2017. The company has a policy of having an inventory of units on hand at the end of each month equal to 30% of next month's budgeted unit sales. If there were 82200 units of inventory on hand on December 31, 2016, how many units should be produced in January, 2017 in order for the company to meet its goals

Calculation of the Ending inventory required to be maintained

Particulars                                               Amount

Next months budgeted sales               310,000

% of unit required to be maintained         30%

at the end of current month

Number of units required to be              93,000

maintained at the end of the

current month

Unit to be produced = Budgeted sales for the month + Ending inventory + Beginning inventory

Unit to be produced = 274,000  + 93,000 + 82,200

Unit to be produced = 449,200

Thus, the number of units to be produced in the month of January 2013 are 449,200 units.

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