ACCA Applied Knowledge · Management Accounting · Budget preparation
Delta Ltd makes a single product. Budgeted sales are 8,000 units. Opening inventory is 1,200 units and closing inventory is planned at 2,000 units. What is the budgeted production in units?
Budgeted production is 8,800 units. Production equals sales plus the planned closing inventory minus opening inventory: 8,000 plus 2,000 minus 1,200. The extra 800 units are needed to build inventory up, since opening stock only covers part of the requirement.
- A7,200
- B8,800Correct
- C9,200
- D6,800
Explanation
Production = sales + closing inventory - opening inventory = 8,000 + 2,000 - 1,200 = 8,800 units. Option 7,200 reverses the inventory movement. Option 9,200 adds opening inventory instead of deducting it.
Did you get it right without looking?
One question tells you little. A timed set on Budget preparation shows your real accuracy, how long you take and where you lose marks.
More Budget preparation questions
- A company uses a rolling budget of four quarters, updated each quarter. The original annual budget for quarters 1 to 4 had direct labour of …
- Ferro Co has a labour budget of 12,000 hours for a month. Employees work a 160-hour month each, but 5% of the time paid is lost to idle time…
- Which of the following is an advantage of participative budgeting?
- Zeta Co plans to produce 4,000 units of Product K next month. Each unit needs 3 kg of material, and 10% of the material input is lost as nor…
- Tarn Co budgets sales of 2,000 units of a product. A 90% learning curve applies, and the first unit takes 100 hours. Which statement about t…
- A company makes products X and Y. Machine hours are limited to 1,200 hours. X contributes $30 per unit and uses 2 machine hours per unit; Y …