1. Production per year: 350 days 2. Production capacity @100% : 1000 Units 3. Capacity utilization in 2017: 90% and in 2018: 92% 4. Work in progress days: 2 days 5. Finished goods inventory: 10 days Assuming except WIP and finished goods inventory, all of the production will be sold, what would be sales quantity in 2017 and 2018?
Sales Quantity Calculation
Answers
Are you looking for the answers, or are you looking for advice on how to figure out the answers?
1
Actually I am looking for advice on how to figure out the answers.
There are two groups in my office, who calculate the answers of the problem in two different ways.
First way (for first year)
Production for 350 days: 900 Units
Closing WIP for 2 days: 5.143 Units =[2*(900/350)]
Total finished goods production: 894.86 units=(900-5.143)
Closing finished goods inventory for 10 days: 25.567 units=[10*(894.86/350)]
Sales quantity for first year: 869.293 units =(894.86-25.567)
Second way ( for first year)
Production for 350 days: 900 Units
Closing WIP for 2 days: 5.143 Units =[2*(900/350)]
Total finished goods production: 894.86 units=(900-5.143)
Closing finished goods inventory for 10 days: 25.714 units=[10*(894.86/348)]
Sales quantity for first year: 869.146 units =(894.86-25.714)
Now my question is which way is correct?
Apart from the the fact that first year results of method 2 are 99.98309% of method 1, what do you see as the difference in the methods?
1
Actually figures are in million, so it really matters.
can you just tell which of the two ways is correct? for finished goods inventory calculation, should the divisor be 350 or 348?
I think the best way for you to address this is to ask both teams
1. why did you use 350 not 348 (team 1), or 348 instead of 350 (team 2)?
2. and then ask each team, would you stay with your number or change? Why?
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Accounting