Flex-Tite manufactures plastic parts. The inventory policy at Flex-Tite is to hold inventory equal to 125% of the average monthly sales for its main product. Sales for the following year are expected to be 870,000 units. Based on the inventory policy, the budget calls for the production of 880,000 units. Required: What is the beginning inventory of the component?

Beginning inventory = 80,650

Explanation:

Lets us use the following method to solve the given problem

Average Monthly Sales = 882000/12=72,500

Required inventory = 72,500*127%=90650

Beginning inventory of the component = 90650-(880,000-870,000) = 80,650

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