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Ski helmet sales are budgeted at 4,800 units, desired ending inventory is 280 units and beginning inventory is 320 units. How many ski helmets must be produced?
A5,080 units
B4,760 units
C4,840 units
D5,400 units
Answer & Solution
Correct answer: B. 4,760 units
1. Start with the 4,800 units of estimated ski helmet sales.
2. Add the 280 units of desired December 31 inventory, giving 5,080 units needed.
3. Deduct the 320 units already on hand at January 1.
4. Units to be produced are 5,080 minus 320, which is 4,760 units.
5. Production is below sales here because opening stock exceeds the closing stock wanted.
6. 5,080 units stops before the opening inventory is deducted.
7. 4,840 units adds 320 and subtracts 280, which reverses the roles of the two inventories.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 7.6 Sales Budget_
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