ExpertEasy1 markMultiple Choice
CPA · Question 43 · Area I: Business Analysis
A company is preparing its budget. It expects to sell 10,000 units. It wants to have 2,000 units in ending inventory. Beginning inventory is 1,500 units. How many units must be produced?
A company is preparing its budget. It expects to sell 10,000 units. It wants to have 2,000 units in ending inventory. Beginning inventory is 1,500 units. How many units must be produced?
Answer options:
A.
10,000
B.
10,500
C.
9,500
D.
11,500
How to approach this question
Formula: Needs = Sales + Ending Inventory. Production = Needs - Beginning Inventory.
Full Answer
B.10,500✓ Correct
Units to Produce = Budgeted Sales + Desired Ending Inventory - Beginning Inventory. 10,000 + 2,000 - 1,500 = 10,500 units.
Common mistakes
Reversing the signs for beginning and ending inventory.
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