You have to consider backlogs here, as those are units you reserve from the next month to compensate for lack of production in the current month, so you "use" them in the current month (then you have them as produced in this month), but have to account for the loss of produced units in the next month (as you took the units "in advance").
You have to think about the relationship between Forecasts and Capacity. the relation here is Forecasts + Ending Inventory = Regular + Beginning Inventory + Subcontract.
Months 1, 3 & 6 forecasts are covered completely by the Regular output, then we get the difference as ending inventory.
In months 2 & 4, Regular + Beginning Inventory are enough to cover Forecasts
Then, in months 5 & 7, Regular + Beginning Inventory are not enough to cover forecasts, so you need to cover the difference by subcontracting the remaining amount.
3 months ago
Isn't it equal to (5) ? We start with 5 of inventory+130 for the production - 140 for the amount used to satisfy the demand in the current period?
No, it is 0 and it cannot be (5) as you can't have negative inventory values, that would not make sense. Your computation is right, but you forgot to add the backlog of 5 engines in it (to the produced side), which then gives you an ending inventory equal to 130 (regular) + 5 (inventory) + 5 (backlog) - 140 = 0.
Hope this makes it clearer.
WHAT'S UP WITH THATKARMA?