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 :)
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Question about Budgeting: Budgeted Production.
8y ago#1
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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