Sherman's interiors sells lamps. At March 31, the company had 400 sofas in inventory. The company's policy is to maintain a lamp inventory equal to 2% of next month's sales. The company expects the following sales activity for the second quarter of the year:
April----- 1,000 lamps
May------- 1,400 lamps
June------ 2,000 lamps
What is the projected production for May?
A.) 1,332 lamps
B.) 1,468 lamps
C.) 1,388 lamps
D.) 1,412 lamps
The way I did it was I took 2% of June's sales (2000x2%) to get 40 and just added that to May's sales of 1400 to get 1440. That wasn't the answer though. Thanks for any help.
Sorry guys. That part is supposed to say 400 lamps, not 400 sofas.
To calculate the projected production for May, you need to follow the company's policy of maintaining a lamp inventory equal to 2% of next month's sales.
Here are the steps to find the projected production for May:
1. Calculate 2% of next month's sales (April sales):
1,000 lamps x 2% = 20 lamps
2. Add the calculated value from step 1 to the next month's sales (May sales):
1,000 lamps + 20 lamps = 1,020 lamps
3. The projected production for May is 1,020 lamps.
Based on this calculation, the correct answer is not among the options provided. The correct answer would be 1,020 lamps.
To determine the projected production for May, we need to calculate the lamp inventory needed for May based on the company's policy, and then add it to the expected sales for May.
First, we need to calculate the lamp inventory needed for May. According to the company's policy, the lamp inventory should be equal to 2% of next month's sales. Next month's sales are 1,400 lamps, so we need to calculate 2% of 1,400.
To calculate 2% of 1,400, we can multiply 1,400 by 2%:
1,400 * (2/100) = 1,400 * 0.02 = 28 lamps
Therefore, the lamp inventory needed for May is 28 lamps.
Now we can add the May sales (1,400 lamps) and the required lamp inventory (28 lamps) to get the projected production for May:
1,400 lamps + 28 lamps = 1,428 lamps
So, the correct answer is not provided in the options you have listed. The projected production for May should be 1,428 lamps.