Question

Projected sales for Kenworth Inc. for next year and beginning and ending inventory data are as​ follows:

Sales 40,000 units
Unit price $20
Beginning inventory 20,000 units
Targeted ending inventory 10,000 units
Each unit requires 5 pounds of material which costs​ $3.00 per pound. The beginning inventory of raw materials is​ 5,000 pounds. The company wants to have​ 3,000 pounds of material in inventory at the end of the year. Each unit produced requires 2 hours of direct labour​ time, which is billed at​ $8 per hour.
According to the production​ budget, how many units should be​produced?
A.​30,000
B.​46,000
C.42,000
D.50,000

Answer 1

According to the production budget, Kenworth Inc. should produce 30,000 units to meet the projected sales and inventory targets for the next year.

Step-by-step explanation:

To calculate the number of units Kenworth Inc. should produce according to the production budget, we need to determine the desired ending inventory and add it to the sales we expect to make, then subtract the beginning inventory. This is shown in the following calculation:

Budgeted units to produce = Sales units + Ending inventory units - Beginning inventory units

Using the provided data, the calculation is as follows:

Budgeted units to produce = 40,000 units (Sales) + 10,000 units (Targeted ending inventory) - 20,000 units (Beginning inventory) = 30,000 units

Therefore, the company should produce 30,000 units according to the production budget.