Stritch Company Is Trying to Decide How Many Units of Merchandise

question 141

Multiple Choice

Stritch Company is trying to decide how many units of merchandise to order each month. The company's policy is to have 20% of the next month's sales in inventory at the end of each month. Projected sales for August, September, and October are 30,000 units, 20,000 units, and 40,000 units, respectively. How many units must be purchased in September?

• A) 14,000.
• B) 20,000.
• C) 22,000.
• D) 24,000.
• E) 28,000.

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Definitions:

Net Operating Income

This metric measures the profitability of a business from its primary operations, excluding expenses from financing and taxes.

Budgeting

The process of creating a plan to allocate resources, forecast revenues, and predict expenses over a future period.

Activity Variance

A measure of the difference between planned or budgeted activity levels and actual activity levels.

Personnel Expenses

Costs related to the compensation and benefits of a company's employees.