Marvel Woodcraft makes furniture. Marvel’s expected sales are 36,000 bookcases for the quarter. The company begins the quarter with inventory of 7,000 bookcases and wants to have enough finished bookcases on hand at the end of the quarter to provide for 20% of the next quarter’s expected sales of 40,000 bookcases. Based on this information, how many bookcases need to be produced during the quarter?

The production requirement for this quarter is 37000 bookcases.

Explanation:

The required closing inventory for this quarter is = 0.2 * 40000  = 8000 bookcases.

The production requirement for this quarter can be calculated by calculating the bookcases that needs to be produced in addition to the opening inventory to meet this quarter's sales and the required closing inventory. Thus, the production for this quarter should be,

Production = Sales requirement for the quarter + Closing Inventory - Opening Inventory

Production = 36000 + 8000 - 7000   =  37000 bookcases

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