Lydia Company Projects the Following Sales in Units for the Third

question 21

Multiple Choice

Lydia Company projects the following sales in units for the third quarter of the year:

If the company wishes to maintain an inventory balance of 5,000 units and has 2,500 units on hand at the end of June,how many units will need to be produced in July?

• A)10,000
• B)12,500
• C)15,000
• D)17,500

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Definitions:

Incremental Cost Approach

An analysis method that evaluates the additional costs of making decisions, comparing the costs that change with the decision versus those that do not change.

Purchase Cost

The amount paid to buy goods, materials, or assets.

Major Repairs

These are significant expenditures to restore or improve an asset, extending its useful life.

Annual Cash Operating Costs

The total amount of money a company spends on its day-to-day operations within a fiscal year.