- 1 Marks
Question
If the expected sales is 360,000 units and the opening inventory is 40,000 units while the closing inventory is anticipated to be one third of sales units, what is the quantity to be produced for a given period?
A. 480,000 units
B. 440,000 units
C. 400,000 units
D. 360,000 units
E. 220,000 units
Answer
Answer: C. 400,000 units
Explanation: The correct answer is “400,000 units”. The quantity to be produced is calculated using the formula:
Quantity to be produced = Expected sales + Closing inventory – Opening inventory.
- Expected sales = 360,000 units.
- Closing inventory = One-third of expected sales = 360,000 ÷ 3 = 120,000 units.
- Opening inventory = 40,000 units.
Therefore, Quantity to be produced = 360,000 + 120,000 – 40,000 = 400,000 units.
Run down: The formula ensures that enough units are produced to meet the expected sales while accounting for changes in inventory levels. This helps ensure that the company meets customer demand without excess or shortfall in stock.
- Tags: Budgeting, Inventory Management, MCQ, Production planning
- Level: Level 1
- Uploader: Dotse