Mikes Bikes has budgeted sales in units for June July and Au

Mike\'s Bikes has budgeted sales in units for June, July and August of 750, 900, and 1,125, respectively. Mike\'s inventory guidelines are to have 20% of the next month\'s sales in inventory at the end of each month. July budgeted production is: A. 630 bikes B. 825 bikes C. 945 bikes D. 975 bikes

Solution

The correct answer is C

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Month

projected sales

Opening Inventory (Sales * .20)

Production needed to meet month sale

closing inventory requirement

June

750

150

600

180

July

900

180

720

225

August

1125

225

900

Pls refer above table.

In July total production will be = (720 + 225) = 945

July projected sales is 900, (900*.2 = 180 units) has already been produced in the month of June as closing inventory.

So to meet July sale need the company will have to produce 900 – 180 = 720 units.

Moreover 20 % of Aug sales 225 units additional units will be produced in JULY.

So total production in July is = 720 + 225 = 945

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Hope this answer your query.

Feel free to comment if you need further assistance. J

Month	projected sales	Opening Inventory (Sales * .20)	Production needed to meet month sale	closing inventory requirement
June	750	150	600	180
July	900	180	720	225
August	1125	225	900