Question

M Corporation produces and sells Product D. To guard against stockouts, the company requires that 25% of the next month's sales be on hand at the end of each month. Budgeted sales of Product D over the next four months are:

	June			July		August		September
Budgeted sales in units	40,000			60,000		50,000		80,000

Budgeted production for August would be:

Multiple Choice

• 77,000 units

• 80,000 units

• 57,500 units

• 107,000 units

Answer 1

Ending Inventory of July = Budgeted Sales of August x 25%

= 50,000 x 25%

= 12,500 units

Beginnning Inventory of August = Ending Inventory of July=12,500 units

Ending Inventory of August = Budgeted Sales of September x 25%

= 80,000 x 25%

=20,000 units

Budgeted Sales of August = Beginning Inventory of August + Production for August - Ending Inventory of August

Production for August = Budgeted Sales of August + Ending Inventory of August- Beginning Inventory of August

= 50,000 +20,000 - 12,500

= 57,500 units

Therefore Productions for August = 57,500 units