CMA Intermediate · Cost Accounting · Budget and Budgetary Control
Nirmal Tools expects sales of 10,000 units in April and 12,000 in May. It keeps closing finished stock equal to 25% of next month's sales. May's budgeted sales are 12,000 and June's are 16,000. Opening stock for April is 2,000 units. What is the production budget for May?
May production is 13,000 units. Closing stock is 25% of June sales, which is 4,000 units, and opening stock is 25% of May sales, which is 3,000 units. Production equals sales 12,000 plus 4,000 minus 3,000, giving 13,000 units.
- A12,000 units
- B13,000 unitsCorrect
- C11,000 units
- D14,000 units
Explanation
May closing stock = 25% of June sales 16,000 = 4,000. May opening stock = 25% of May sales 12,000 = 3,000. Production = 12,000 + 4,000 - 3,000 = 13,000 units. 12,000 ignores stock change; 11,000 reverses the adjustment.
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