Question

Bailey Corporation budgets on an annual basis for its fiscal year. Three pounds of raw material are needed to produce each unit of finished product. The following beginning and ending inventory levels (in units) are planned for next year. Beginning Inventory Ending Inventory Raw material 30,000 40,000 Finished goods 70,000 60,000 If Bailey Corporation plans to sell 510,000 units during next year, the number of units it would have to manufacture during the year would be:

Answer 1

Answer:

500,000 units

Explanation:

The Production Budget can be used to determine the number of units that needs to be manufactured in order to meet Sales and Inventory targets as follows :

Production Budget for Next Year

Sales                                                                             510,000

Add Closing Finished Goods Inventory                      60,000

Total                                                                             570,000

Less Opening  Finished Goods Inventory                 (70,000)

Budgeted Production                                                 500,000

Therefore,

The number of units it would have to manufacture during the year would be 500,000