Question

Sales for Ross Pro’s Sports Equipment are expected to be 4,800 units for the coming month. The company likes to maintain 10 percent of unit sales for each month in ending inventory. Beginning inventory is 300 units. How many units should the firm produce for the coming month?

Short answer

The number of units that should be produced by the company for the coming months is 4,980.

Step-by-step solution

Year ending inventory

$\begin{array}{rcl}\mathrm{Year}\mathrm{ending}\mathrm{inventory}& =& \mathrm{Expected}\mathrm{sales}\mathrm{units}\times \mathrm{Percentage}\mathrm{of}\mathrm{ending}\mathrm{inventory}\\ & =& 4,800\times 10\%\\ & =& 480\end{array}$

Number of units to be produced

$\begin{array}{rcl}\mathrm{Number}\mathrm{of}\mathrm{units}\mathrm{produced}& =& \mathrm{Sales}\mathrm{units}+\mathrm{Ending}\mathrm{inventory}-\mathrm{Opening}\mathrm{units}\\ & =& 4,800+480-300\\ & =& 4,980\end{array}$