Good Afternoon,
Budgeted sales of X for December are 18,000 units. At the end of the production process for X, 10% of production units are scrapped as defective. Opening inventories of X for December are budgeted to be 15,000 units and closing inventories will be 11,400 units. All inventories of finished goods must have successfully passed the quality control check. What is the production budget for X for December?
Ans:
Budgeted Sales 18000
Budgeted reduction in finished good (3600)
Budgeted production of completed units 14400
Allowance for defective units (10% of output= 1/9 of input) = 1600
Production budget = 16000
Please can you explain how the 'allowance for defective unit' was calculated?
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Budgeting BPP Question
4y ago#1For every 100 units produced, 10 turn out to be defective and so only 90 are 'good' units.
Putting it the other way round, for every 90 good units there must have been 10 defective (i.e. 1/9)
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