Modesto Company produces and sells Product AlphaB. company requires that 20% of the next month's sales be on hand at the end of each month.
Budgeted sales of Product AlphaB over the next four months are: $30,00040,00060,00050,000\begin{array} { | l | l | l | l | l | } \hline & \text { June } & \text { July } & \text { August } & \text { September } \\\hline \begin{array} { l } \text { Budgeted sales in } \\\text { units }\end{array} & 30,000 & 40,000 & 60,000 & 50,000 \\\hline\end{array}$ Budgeted production units for August will be:

A) 58,000.
B) 50,000.
C) 70,000.
D) 62,000.

Question

Modesto Company produces and sells Product AlphaB. company requires that 20% of the next month's sales be on hand at the end of each month.
Budgeted sales of Product AlphaB over the next four months are:

30,00040,00060,00050,000\begin{array} { | l | l | l | l | l | } \hline & \text { June } & \text { July } & \text { August } & \text { September } \\\hline \begin{array} { l } \text { Budgeted sales in } \\\text { units }\end{array} & 30,000 & 40,000 & 60,000 & 50,000 \\\hline\end{array}

Budgeted production units for August will be:

A) 58,000.
B) 50,000.
C) 70,000.
D) 62,000.

Kayla Rutledge · Accepted Answer

Final Answer : A, Explanation :  The correct answer is A.The company requires that 20% of the next month's sales be on hand at the end of each month. So, the ending inventory for July is 0.20 * 40,000 = 8,000 units. The ending inventory for August is 0.20 * 60,000 = 12,000 units. The production for August is the sum of the budgeted sales for August and the ending inventory for August, which is 60,000 + 12,000 = 58,000 units.

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