Jannusch Corporation makes one product.Budgeted unit sales for July, August, September, and October are 10,000, 11,600, 13,300, and 12,700 units, respectively.The ending finished goods inventory should equal 20% of the following month's sales.The budgeted required production for August is closest to:

A) 11,600 units
B) 11,940 units
C) 14,260 units
D) 16,580 units

Question

Alba M. Batres Pinto · Accepted Answer

Final Answer : B, Explanation :  To calculate the required production for August, we need to calculate the total number of units needed in August and subtract the ending finished goods inventory for July.Total units needed in August = Budgeted unit sales in August + Ending finished goods inventory for September= 11,600 + (20% of 13,300) = 11,600 + 2,660= 14,260 unitsEnding finished goods inventory for July = 20% of August sales = 20% of 11,600 = 2,320Therefore, the required production for August = Total units needed in August – Ending finished goods inventory for July= 14,260 – 2,320= 11,940 unitsHence, the closest option is B) 11,940 units. The budgeted required production for August is computed as follows:   *September sales of 13,300 units × 20% = 2,660 units** August sales of 11,600 units × 20%= 2,320 units

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