Acme Manufacturing is producing 4020000 worth of goods this

Acme Manufacturing is producing $4,020,000 worth of goods this year and expects to sell its entire production. It also is planning to purchase $1,500,000 in new equipment during the year. At the beginning of the year, the company has $500,000 in inventory in its warehouse. Find actual investment and planned investment if:

  a. Acme actually sells $3,850,000 worth of goods.

  b. Acme actually sells $4,000,000 worth of goods.

  c. Acme actually sells $4,200,000 worth of goods.

Solution

Planned investment = Planned equipment purchase during year + Beginning inventory

Actual investment = Planned investment + Unplanned change in inventory = Planned investment + (Production - Sales)

(a)

Planned investment ($) = 1,500,000 + 500,000 = 2,000,000

Actual investment ($) = 2,000,000 + (4,020,000 - 3,850,000) = 2,170,000

(b)

Planned investment ($) = 1,500,000 + 500,000 = 2,000,000

Actual investment ($) = 2,000,000 + (4,020,000 - 4,000,000) = 2,020,000

(c)

Planned investment ($) = 1,500,000 + 500,000 = 2,000,000

Actual investment ($) = 2,000,000 + (4,020,000 - 4,200,000) = 1,820,000