CMA Foundation · Fundamentals of Financial and Cost Accounting · Application of Cost Accounting for Business Decisions
Verma Ltd budgets sales of 8,000 units for the next period. Opening finished stock is 1,000 units and the desired closing finished stock is 1,800 units. The production budget (in units) should be:
Budgeted production is 8,800 units. Production equals budgeted sales plus desired closing stock less opening stock, which is 8,000 plus 1,800 minus 1,000. The company must build stock by 800 units beyond sales.
- A7,200
- B8,800Correct
- C9,800
- D8,000
Explanation
Production = Sales + Closing stock - Opening stock = 8,000 + 1,800 - 1,000 = 8,800 units. Choosing 7,200 reverses the stock adjustment (8,000 - 1,800 + 1,000).
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