CMA Intermediate · Management Accounting · Forecasting, Budgeting and Budgetary Control
Sharma Textiles Ltd. budgets sales of 12,000 units. Opening finished stock is 1,500 units and the desired closing finished stock is 2,500 units. How many units must be produced as per the production budget?
The production budget is 13,000 units. Production equals budgeted sales plus desired closing stock minus opening stock, which is 12,000 + 2,500 - 1,500. The stock build-up of 1,000 units must be produced in addition to the sales requirement.
- A11,000 units
- B13,000 unitsCorrect
- C12,000 units
- D16,000 units
Explanation
Production = Sales + Closing stock - Opening stock = 12,000 + 2,500 - 1,500 = 13,000 units. Option 11,000 arises from reversing the stock adjustment (12,000 - 2,500 + 1,500). Option 16,000 adds both stocks to sales.
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