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A manufacturing company always carries finished goods inventory level equal to 20% of the next month’s budgeted sales.
Sales for the current month are 2000 units and are budgeted to be 20% higher next month.
How many units will be produced in the current month?
answer 2080 units
please help the calculation to get 2080 units, thank you
The closing inventory last month must be 20% of this months sales: 20% x 2000 = 400.
Next months sales are 2000 + 20% = 2400, so the closing inventory this month must be 20% x 2400 = 480
So the production this month is 2000 (sales) – 400 (opening inventory) + 480 closing inventory = 2080
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