CMA Foundation · Fundamentals of Financial and Cost Accounting · Application of Cost Accounting for Business Decisions
Verma Foods budgets sales of 8,000 units and a closing stock of 1,500 units, with an opening stock of 1,000 units. What is the production budget in units?
Budgeted production is 8,500 units. It equals sales of 8,000 plus the desired closing stock of 1,500, less the opening stock of 1,000 already available. Reversing the stock adjustment would wrongly give 7,500 units.
- A8,500Correct
- B7,500
- C9,500
- D8,000
Explanation
Production = Sales + Closing stock - Opening stock = 8,000 + 1,500 - 1,000 = 8,500 units. Choosing 7,500 reverses the stock adjustment.
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