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

    Posted 28 days ago
    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 ?
    Please give me some advice.



    WITH REGARDS,


    SARUN PORATHUR SIMON




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

    Posted 28 days ago

    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.



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

    Posted 28 days ago

    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.



    ------------------------------
    Deepak Mundoli Velluva
    Analyst
    Kadirur
    India
    ------------------------------



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

    Posted 28 days ago

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



    ------------------------------
    Bilal Mohammad
    Accountant
    Abudhabi
    United Arab Emirates
    ------------------------------