CMA Intermediate · Management Accounting · Forecasting, Budgeting and Budgetary Control
Sharma Industries expects to sell 12,000 units in the coming quarter. Opening finished stock is 1,500 units and the closing stock target is 2,300 units. What is the production budget in units?
The production budget is 12,800 units. Production must cover sales of 12,000 units plus the 2,300 units wanted as closing stock, less the 1,500 units already available as opening stock. Hence 12,000 + 2,300 - 1,500 equals 12,800 units.
- A12,800Correct
- B11,200
- C13,800
- D14,300
Explanation
Production = sales + closing stock - opening stock = 12,000 + 2,300 - 1,500 = 12,800 units. Option 11,200 reverses the stock adjustment (subtracting closing, adding opening). Option 14,300 ignores the opening stock.
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