Question

ABC Company's budgeted sales are as follows:

July = 3,000 units; August = 2,500 units.
June ending inventory = 1,200 units.
Budgeted ending inventory must equal 40% of next month's budgeted sales.
Production budgeted for July would equal units = ? units

Answer 1

The production budget for July would be 2,800 units, calculated by adding July's budgeted sales to the desired ending inventory and then subtracting the ending inventory from June.

Step-by-step explanation:

The student is asking about the preparation of a production budget for the ABC Company for the month of July. To answer this, we need to calculate the required production by adding the budgeted sales to the desired ending inventory for July, and then subtracting the June ending inventory.

First, we calculate the desired ending inventory for July which is 40% of August's budgeted sales. So, 40% of 2,500 units (August sales) is 1,000 units. Then, we prepare the production budget for July: Budgeted sales for July (3,000 units) + Desired ending inventory for July (1,000 units) - June ending inventory (1,200 units) = 2,800 units.

Thus, the budgeted production for ABC Company in July would be 2,800 units.