Question: Waterloo, Ltd. manufactures a component used in aircraft navigation systems. Demand has been strong and the executive staff at Waterloo is planning for next year.

Waterloo, Ltd. manufactures a component used in aircraft navigation systems. Demand has been strong and the executive staff at Waterloo is planning for next year. Yesterday, you were called into a budgeting meeting where production plans are being reviewed. You learn that the inventory policy at Waterloo is to hold one and one-half months' worth of sales (to avoid issues with transportation disruptions). The sales budget for next year is 660,000 units, spread evenly over the year. Because of an unexpected increase in demand, inventory at the end of this year is expected to be only 30,000 units. The capacity of the plant is 700,000 units annually.
Required
a. What production level next year will be required to meet the targets?
b. Are there any issues that you believe you should bring to the attention of the executive staff ?
c. Do you have any suggestions for the resolution of these issues?

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