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A company manufactures and sells a single product. AT the end of the process all units are inspected and 20% are rejected and scrapped. Next year the budgeted sales are 384000 and the inventory of finished goods will increase by 4000 units. What is next years budgeted production that is subject ti inspection?
My calculation would be to add 4000 to 384000 which equals 388000…which is wrong. whats the correction calculation please
We need to produce 388,000 ‘good’ units.
However the questions asks how many will be inspected.
For every 100 inspected, 20 are rejected and only 80 are ‘good’.
So for 388,000 ‘good’ we will need to have produced 388,000 x 100/80
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