Question

M Corporation produces and sells Product D. To guard against stockouts,

the company requires that 25% of the next month's sales be on hand at the end of each month. Budgeted sales of Product D over the next four months are:


Budget sales in units: June 40,000 / July 60,000 / August 50,000 / September 80,000


Budgeted production for August would be:


a. 57,500 units

b. 107,000 units

c. 77,000 units

d. 80,000 units

Answer 1

Production= 57,500 units

Step-by-step explanation:

Giving the following formula:

Desired ending inventory= 25% of the next month's sales

Budget sales in units:

August 50,000

September 80,000

To calculate the production for August, we need to use the following formula:

Production= sales + desired ending inventory - beginning inventory

Production= 50,000 + (80,000*0.25) - (50,000*0.25)

Production= 57,500 units