Question

Budgeted production is calculated by:

A. adding budgeted unit sales to budgeted beginning finished goods inventory, and subtracting budgeted ending finished goods inventory.

B. adding budgeted unit sales to budgeted ending finished goods inventory, and subtracting budgeted beginning finished goods inventory.

C. adding budgeted unit sales to budgeted ending work in process inventory, and subtracting budgeted beginning work in process inventory.

D. adding budgeted unit sales to budgeted beginning work in process inventory, and subtracting budgeted ending work in process inventory.

Answer 1

Answer:

A company uses a production budget which is based on budgeted sales & adjustment for planned inventory level. The product budget shows the number of units products to be manufactured & hence considered the adjustment of finished inventory with numbers of sales units. the production budget also helps the organisation to determine how much raw material, labour & overhead cost will be required for the budgeted production units.

Budgeted production can be calculated by adding the budgeted sales units to budgeted ending finished goods, and subtracting budgeted beginning finished goods inventory & not the work in progress units.

Accordingly, Option (B) i.e. "adding budgeted unit sales to budgeted ending finished goods inventory, and subtracting budgeted beginning finished goods inventory" is the correct answer.