Porcelain Interiors sells a variety of porcelain products including porcelain sinks. At December 31, the company had 200 sinks in inventory. The company's policy is to maintain a sink inventory equal to 5% of next month's sales. The company expects the following sales activity for the first quarter of the year:January 1,500 sinks
February 2,000 sinks
March 2,300 sinks
What is the projected production for February?
A) 2,115
B) 2,015
C) 1,985
D) 2,215

The correct answer is B.

Explanation:

Giving the following information:

The company's policy is to maintain a sink inventory equal to 5% of next month's sales.

Sales:

February 2,000 sinks

March 2,300 sinks

To determine the number of sinks to be produced in February, we need to use the following formula:

Production= sales + desired ending inventory - beginning inventory

Production Budget February:

Sales= 2,000 sinks

Ending inventory= 2,300*0.05= 115

Beginning inventory= 2,000*0.05= (100)

Total= 2,015 sinks

The projected production for February is B) 2015 sinks

Explanation:

The projected production for any month will include an opening inventory that is expected to be equal to 5% of that month's sale plus production for that month's remaining sales and production of units equal to 5% of net month's sales.

The expected opening inventory for February under this assumption is 2000*5% = 100 sinks.

Out of the sales of 2000 for February, 100 will be covered by opening inventory. The remaining sales are 2000 - 100 = 1900

Thus, the production requirement for February will include production requirement for February's sales = 2000 - 100 = 1900

plus the production requirement equal to 5% of march sales = 2300 * 5% = 115

Production in February = 1900 + 115 = 2015 sinks

are you looking for a specific answer?

two years ago, when picking flowers in the mountains back of yosemite valley, i found a book. it was blotted and storm-beaten; all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however; many of the inner pages were well preserved. and although all were more or less stained and torn, whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today; its granite pages have been torn and blurred by the same storms that wasted the castaway book.

two years ago, when picking flowers in the mountains back of yosemite valley; i found a book. it was blotted and storm-beaten, all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however, many of the inner pages were well preserved. and although all were more or less stained and torn; whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today, its granite pages have been torn and blurred by the same storms that wasted the castaway book.