ACCA Applied Knowledge · Management Accounting · Budget preparation
A company budgets sales of 12,000 units for next period. Opening inventory of finished goods is 1,500 units and the closing inventory target is 2,100 units. How many units must be produced in the production budget?
Production is 12,600 units. Budgeted sales of 12,000 are increased by the 2,100 units needed for closing inventory and reduced by the 1,500 units already held at the start, so only the net build-up of 600 units is added to production.
- A11,400
- B12,600Correct
- C13,500
- D10,500
Explanation
Production = sales + closing inventory - opening inventory = 12,000 + 2,100 - 1,500 = 12,600 units. Option 11,400 wrongly reverses the inventory adjustment (12,000 - 2,100 + 1,500).
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