Answer:
None of the options from A to D has the correct answer.
The correct answer is:
5,665 units
Explanation:
To calculate the budgeted production units for August, we will first of all calculate the ending inventory unit balance from July, which is the same as beginning inventory for August, and that is shown thus:
ending finished good inventory = 25% of the next month's sales.
∴ ending finished goods inventory for July = 25% of 5,700
= 25/100 × 5,700 = 0.25 × 5,700 = 1,425 units
Next, let us calculate the projected ending finished goods inventory for August, as shown below:
August ending inventory = 25% of September's sale
= 0.25 × 5,560 = 1,390 units.
Units to be produced in August is calculated thus:
Total units required in August = sales + ending inventory
= 5,700 + 1,390 = 7,090 units
Remember that we had a beginning inventory for August of 1,425 units from July's ending balance. Therefore, out of the total units required in August, 1,425 units is already available, hence the units to be produced is calculated as:
Production units in August = Total units required in August - Beginning inventory
= 7,090 - 1,425 = $5,665
