Determine the number of units expected to be manufactured in May.
Based on the following pproduction and sales estimates for May:
Estimated inventory (units), May 1: 20,000
Desired inventory (units), May 31: 15,000
Expected sales volume (units):
South region: 20,000
West region: 40,000
North region: 20,000
Unit sales price: $10.
According to the production and sales estimates, the company's inventory as on May 1st is 20000 units. It only requires the inventory to be 15000 units on May 31. This means that 5000 units from the inventory can be sold. The expected sales for the month of May are 20000 units in the South region, 40000 units in the West region and 20000 units in the North region.
The total number of units that need to be manufactured in the month of May is equal to the sum of the total sales of units and as 5000 units from the inventory are being used, 5000 lesser units are required.
This is equal to 40000 + 20000 + 20000 + ( 15000 - 20000)
=> 80000 - 5000
The correct number of units that have to be manufactured in May is 75000.
The company must manufacture 75,000 units in May.
The reason for this is that the company needs to manufacture enough units to hit their sales targets and to, at the same time, come up with the desired level of inventory at the end of the month.
In the three regions mentioned, the company plans to sell 80,000 units. However, this is not the number they need to manufacture. This is because the company plans to have 5,000 fewer units in inventory at the end of the month than at the beginning. Therefore, the firm will sell 5,000 units that are already in inventory.
80,000 - 5,000 = 75,000 and so the answer must be cC.