# CMA Study Group

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## Q & A - SECTION B.5 - BUDGETING

• #### 1.  Q & A - SECTION B.5 - BUDGETING

Posted 05-11-2023 08:57 AM
Q - Ming Company has budgeted sales at 6,300 units for the next fiscal year, and desires to have 590 good units on hand at the end of that year. Beginning inventory is 470 units. Ming has found from past experience that 10% of all units produced do not pass final inspection, and must therefore be destroyed. How many units should Ming plan to produce in the next fiscal year?
OPTIONS -
6,890
7062
7133
7186

My answer is 7062. Question bank says it's wrong ?

WITH REGARDS,

SARUN PORATHUR SIMON

• #### 2.  RE: Q & A - SECTION B.5 - BUDGETING

Posted 05-12-2023 12:58 AM

Hi,
It is 7,133 units to produce.

No. of units to be manufactured = [Sales units given 6,300 + 120 units  which increase in Closing stock which works out to actual acceptable finished goods ] Now, this is at 90% due to 10% inspection failure and therefore, the total manufactured  units to  be manufacture is ( 6420 x100 ) / 90 = 7,133units.

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Kishore Kumar Natakala
Other
BENGALURU
India
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• #### 3.  RE: Q & A - SECTION B.5 - BUDGETING

Posted 05-12-2023 01:00 AM

Hi Sarun,

I believe it should be 7133 units. 90% of 7133 = 6420 which makes the units required. 590 + 6300 - 470 = 6420

The reason for obtaining 7062 is because you are multiplying 6420 by 1.1  whereas you need to gross up by dividing 6420 with 0.9

Regards.

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Deepak Mundoli Velluva
Analyst
India
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• #### 4.  RE: Q & A - SECTION B.5 - BUDGETING

Posted 05-12-2023 02:26 AM

Budget.  6300
+desired ending 590
- beginning inventory 470
______________________
=.                                6420
10% spoiled then 90% good units
6420 /. 9=7133.

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Accountant
Abudhabi
United Arab Emirates
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