Bacon has budgeted sales for the first quarter of the next year to be 30,000 units. The inventory in hand at the beginning of quarter is 5,000 units. The desired ending inventory is 10,000 units. What is the budgeted production for the quarter?

a. 10,000 units

b. 35,000 units

c. 25,000 units

d. 40,000 units

Option B is correct

35,000 units

Explanation:

The production budgeted for a particular period is the expected units to be produced after adjusting the sales budget figures for opening and closing inventories.

Production = Sales volume + closing inventory - opening inventory

Production budget = 30,000 + 10,000 - 5,000

= 35,000 units

The budgeted production is 35000 units and option B is the correct answer.

Explanation:

The budgeted production for the quarter should be enough to meet the demand for sales for the quarter along with providing enough inventory to meet the desired level of ending inventory.

However, some of the sales for the quarter can be fulfilled using the opening inventory. Thus, we need to determine the net amount of sales that will remain uncovered after selling off the opening inventory.

Remaining sales for the quarter = Sales - Opening Inventory

Remaining sales for the quarter = 30000 - 5000 = 25000 units

The budgeted production is = 25000 + 10000 = 35000 units