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Forums › ACCA Forums › ACCA MA Management Accounting Forums › Budget preparation
Hi,Sir.
Hiccup expects the following sales volumes for the first quarter of next year:
January. 5000 units
February. 4000units
March. 8000units
Finished goods inventory on 1 January is expected to be 1000 units.However,the company’s policy for next year will be to maintain finished goods inventory level at 80% of the following month’s sales.
How many units should be budgeted for production in January?
The answer is 7200
The production units will be the sales less the opening inventory plus the closing inventory.
You know the sale and the opening inventory from the question.
The closing inventory is 80% of February’s sales, so 3,200.