Question

Don is a product of the Digby company. Digby's sales forecast for Don is 505 units. Digby wants to have an extra 10% of units on hand above and beyond their forecast in case sales are better than expected. (They would risk the possibility of excess inventory carrying charges rather than risk lost profits on a stock out.) Taking current inventory into account, what will Don's Production After Adjustment have to be in order to have a 10% reserve of units available for sale?

454 units
556 units
505 units
404 units

Answer 1

Production unit will be 556

So option (c) will be the correct option

Step-by-step explanation:

We have given sales for cost for don = 505 units

Digby wants to have an extra 10% units on hand beyond their forecast

So reserve percentage = 10 % = 0.10

We have to find the total number of production unit

We know that production unit is given by

Production unit = Sales ( 1 + reserve percentage )

=
`505* (1+0.1)=505* 1.1=555.5=556units`

So option (c) will be the correct option