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Hi,
I have a question regarding the Exercise 2 in this lesson.
It says that we have closing inventories of FG & RM.
Doesn’t that mean we have those as our inventory? Therefore when we are preparing the Production budget shouldn’t we reduce our production from the full amount of closing FG inventory as we already have them?
Closing FG inventory –
X – 600u
Y – 1000u
Z – 800u– Production Budget
X : 2000u – 600u = 1400u
Y : 4000u – 1000u =3000u
Z : 3000u – 800u = 2200u ?With the production budget, the units produced is the balancing figure.
You have opened in the first period with 500 units you need to close with 600 units aswell as produce enough for sales of 2000 units.Therefore
O/c (500)
sales 2000
closing 600
so production must be 2100 this yearHope that’s makes sense?
Cath.Thank you Cath.
Still bit confused, but it will be ok as I am starting practice questions.Thanks again.
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