Ecology Co Ending Inventory for Each Month Should Be 20% of the the Following

question 9

Multiple Choice

Ecology Co.sells a biodegradable product called Dissol and has predicted the following sales for the first four months of the current year: $\begin{array}{lclrl}& \text { Jan. } & \text { Feb. } & \text { March } & \text { April } \\\text { Sales in units } &1,700 & 1,900 & 2,100 & 1,600\end{array}$ Ending inventory for each month should be 20% of the next month's sales, and the December 31 inventory is consistent with that policy.How many units should be purchased in February?

• A)1,860
• B)1,900
• C)1,940
• D)1,980
• E)2,320

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Definitions:

Allocative Efficiency

A state of the economy in which resources are allocated in a way that maximizes the overall benefit to society, with goods and services produced at their highest-valued uses.

Purely Competitive

A market format where numerous small companies offer an identical product with no barriers to entering or leaving the market, resulting in firms accepting the market price as given.

Marginal Benefit

The further utility or pleasure gained from consuming one additional unit of a good or service.

Creative Destruction

A concept in economics introduced by Joseph Schumpeter, describing the process by which old industries or technologies are destroyed and replaced by new ones.