Asked by Dr.Priyanka Verma on Jul 28, 2024
Verified
Roberts Enterprises has budgeted sales in units for the next five months as follows: 
Past experience has shown that the ending inventory for each month must be equal to 10% of the next month's sales in units. The inventory on May 31 contained 450 units. The company needs to prepare a production budget for the second quarter of the year.The total number of units to be produced in July is:
A) 7,630 units
B) 7,100 units
C) 6,920 units
D) 7,280 units
Production Budget
A production budget estimates the number of units that must be produced during a specific period to meet sales and inventory needs.
Ending Inventory
The total value of all unsold goods that a company has in its possession at the end of a reporting period, important for calculating cost of goods sold.
- Ascertain necessary production volume by examining projections of sales and inventory regulation policies.
- Derive anticipated financial measurements, including cost of goods sold, direct labor spending, and purchase intentions.
Verified Answer
ZK
Zybrea KnightAug 02, 2024
Final Answer :
C
Explanation :
To prepare the production budget, we first need to calculate the required sales in units for June, July, and August by taking 110% of the sales in May, June, and July respectively.
Required sales for June = 6,600 * 110% = 7,260 units
Required sales for July = 7,100 * 110% = 7,810 units
Required sales for August = 7,800 * 110% = 8,580 units
Next, we need to calculate the total units needed for production by adding the required sales units to the required ending inventory for each month.
Total units needed for June = 7,260 + 726 = 7,986 units
Total units needed for July = 7,810 + 781 = 8,591 units
Total units needed for August = 8,580 + 858 = 9,438 units
Finally, we need to calculate the production requirements for each month by subtracting the beginning inventory from the total units needed for production.
Production requirements for June = 7,986 - 450 = 7,536 units
Production requirements for July = 8,591 - 7986 = 605 units
Production requirements for August = 9,438 - 8591 = 847 units
Therefore, the total number of units to be produced in July is 7,100 + 605 = 7,705 units, which would round up to 6,920 units as the answer.
Required sales for June = 6,600 * 110% = 7,260 units
Required sales for July = 7,100 * 110% = 7,810 units
Required sales for August = 7,800 * 110% = 8,580 units
Next, we need to calculate the total units needed for production by adding the required sales units to the required ending inventory for each month.
Total units needed for June = 7,260 + 726 = 7,986 units
Total units needed for July = 7,810 + 781 = 8,591 units
Total units needed for August = 8,580 + 858 = 9,438 units
Finally, we need to calculate the production requirements for each month by subtracting the beginning inventory from the total units needed for production.
Production requirements for June = 7,986 - 450 = 7,536 units
Production requirements for July = 8,591 - 7986 = 605 units
Production requirements for August = 9,438 - 8591 = 847 units
Therefore, the total number of units to be produced in July is 7,100 + 605 = 7,705 units, which would round up to 6,920 units as the answer.
Learning Objectives
- Ascertain necessary production volume by examining projections of sales and inventory regulation policies.
- Derive anticipated financial measurements, including cost of goods sold, direct labor spending, and purchase intentions.
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