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Question about Budgeting: Budgeted Production.

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Question about Budgeting: Budgeted Production.

  • This topic has 1 reply, 2 voices, and was last updated 7 years ago by John Moffat.
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  • Author
    Posts
  • November 11, 2017 at 10:59 am #415241
    ei8ht
    Member
    • Topics: 8
    • Replies: 3
    • ☆

    Company plans to sell 24000 units of R next year. Opening inventory of R is expected to be 2000 units and company plans to increase inventory by 25% by the end of the year. How many units of product R should be produced next year?

    Answer is 24500 units.

    However, I thought that Budgeted Production = Budgeted Sales + Closing Inventory – Opening Inventory. Therefore, my answer was 22500 because I subtracted 2000 units. How come Opening Inventory wasn’t subtracted here?

    Thanks in advance 🙂

    November 12, 2017 at 10:03 am #415356
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54665
    • ☆☆☆☆☆

    The closing inventory is 25% higher than the opening inventory and is therefore 2,500.

    Therefore the production is 24,000 + 2,500 – 2,000 = 24,500 !!

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