CA Intermediate · Cost and Management Accounting · Budgets and Budgetary Control
Verma Ltd expects to sell 8,000 units in March and 10,000 units in April. Desired closing finished stock is 20% of the next month's sales. Opening stock for March is 1,200 units. How many units should be produced in March?
March production should be 8,800 units. Desired closing stock is 20% of April sales, which is 2,000 units, so production equals sales of 8,000 plus closing stock of 2,000 less opening stock of 1,200.
- A8,800 unitsCorrect
- B9,200 units
- C8,000 units
- D10,000 units
Explanation
Closing stock of March = 20% x 10,000 = 2,000 units. Production = Sales + Closing stock - Opening stock = 8,000 + 2,000 - 1,200 = 8,800 units. Choosing 9,200 comes from adding the opening stock instead of subtracting it.
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