CMA Intermediate · Cost Accounting · Budget and Budgetary Control
Sales budget of Kaveri Appliances for Q1 is 12,000 units. Opening finished stock is 1,500 units and the desired closing stock is 2,000 units. What is the production budget for the quarter?
The production budget is 12,500 units. Production equals budgeted sales plus desired closing stock minus opening stock, so 12,000 plus 2,000 minus 1,500 gives 12,500 units. Stock build-up of 500 units must be produced in addition to sales.
- A11,500 units
- B12,500 unitsCorrect
- C13,500 units
- D12,000 units
Explanation
Production = Sales + Closing stock - Opening stock = 12,000 + 2,000 - 1,500 = 12,500 units. Choosing 11,500 reverses the stock adjustment (subtracting closing and adding opening).
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