You start the year with 2,000 bicycles in inventory, and 3,000 tires. You want to sell 12,000, so automatically we know you need to produce 10,000 bicycles. You need 20,000 tires and you already have 3,000 in stock, so you have to buy 17,000 tires to meet the current sales.
Policy is to have 20% of the following months sales requirement in ending inventory, so 16,000*20%=3,200*2= 6,400 tires you have to buy to produce 20% of next months sales.
Policy states that you need to have 10% of next months production on hand. In february, you need to sell 16,000 bicycles, but you already had 3,200 on hand, so you need to produce 12,800 Bicycles (16,000-3,200), which equates to 25,600 in tires. Also, for February you need to produce 20% of March's sales, so 18,000*20%= 3,600 Bicycles, which equates to 7,200 tires. In total, production for February is 32,800 (25,600+7,200). 32, 800 *10%= 3,280
So it should be 17,000+ 6,400+3,280= 26,680
FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.
.