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Sales Quantity Calculation

turab Ippo's Profile

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?

Answers

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

Are you looking for the answers, or are you looking for advice on how to figure out the answers?

turab Ippo
Title: Analyst
Company: BDCF
(Analyst, BDCF) |

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?

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

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?

turab Ippo
Title: Analyst
Company: BDCF
(Analyst, BDCF) |

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?

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

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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