ABC Ltd. produces and sells a single product. Sales budget to the calendar year 2015 for each quarter is as under : No. of units to be sold : Quarter-I : 12,000 Quarter-II : 15,000 Quarter-III : 16,500 Quarter-IV : 18,00

CS Executive · Cost and Management Accounting · PYQS · December 2014
ABC Ltd. produces and sells a single product. Sales budget to the calendar year 2015 for each quarter is as under : No. of units to be sold : Quarter-I : 12,000 Quarter-II : 15,000 Quarter-III : 16,500 Quarter-IV : 18,000 The year 2015 is expected to open with an inventory of 4,000 units of finished product and close with an inventory of 6,500 units. Production is customarily scheduled to provide for two-thirds of the current quarter's demand plus one-third of the following quarter's demand. Production for Quarter - IV would be —
(A) 13,500 units
(B) 15,500 units
(C) 17,000 units
(D) 18,500 units.

Answer & Explanation:

Correct Answer: Option (D)

Correct answer: (D) 18,500 units.. Annual production = 61,500 + 6,500−4,000 = 64,000. First three quarters produce 13,000, 15,500 and 17,000; the fourth produces 18,500.

Topics: Budgetary Control

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