Question

In a production budget, if the number of units in finished goods inventory at the end of the period is less than the number of units in finished goods inventory at the beginning of the period, then the expected number of units sold is less than the number of units to be produced during the period.
True or False

Answer 1

Answer: False

Explanation:

In a production budget, when the number of units in finished goods inventory at the end of the period is less than the number of units in the finished goods inventory at the beginning of the period, this simply means that the expected number of units sold is higher than the number of units that was produced for that particular period.

Fro example, let's assume that the beginning inventory is 20,000 and the units of goods produced is 25,000 while the units sold is 27,000. Then, the ending units will be:

= 20,000 + 25,000 - 27,000

= 18,000

As we can see from the example, the number of units in the finished goods inventory at the end of the period(18,000) is less than the number of units in the finished goods inventory at the beginning of the period(20,000), the expected number of units sold(27,000) is more or higher than the number of units to be produced(25,000) during the period.