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budgeting

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › budgeting

  • This topic has 3 replies, 2 voices, and was last updated 9 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • November 30, 2015 at 8:05 am #286313
    yongwei21
    Member
    • Topics: 7
    • Replies: 4
    • ☆

    Hi Sir, please help me to answer the question below.

    A company manufactures and sells a single product. and 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 units will increase by 4000 units.
    What is next years budgeted production that will be subject to inspection?

    My answer is 388000 units and it was wrong. The correct answer was 485000 units!
    So why?

    November 30, 2015 at 11:14 am #286379
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54696
    • ☆☆☆☆☆

    If 20% are rejected, then for every 100 units produced, 20 are rejected and therefore only 80 are good units.

    Putting it the other way round, for every 80 good units they need to produce 100 units.

    So to end up with 388,000 good units, they need to produce 100/80 x 388,000 = 485,000 units.

    December 1, 2015 at 9:27 am #286657
    yongwei21
    Member
    • Topics: 7
    • Replies: 4
    • ☆

    Thank you so much!

    December 1, 2015 at 11:19 am #286694
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54696
    • ☆☆☆☆☆

    You are welcome 🙂

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    Posts
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