Day: March 19, 2023

The sales budget for Alex plc shows monthly sales of 300 units for July and 600 units for August.

Stock at the start of a month is budgeted to be 50 % of the month’s planned sales.

10 % of production in a month is faulty.

What is the actual production quantity for July to achieve the budgeted sales?

Select ONE answer:

1. 300 units
2. 450 units
3. 495 units
4. 500 units

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct == >
   • To determine the actual production quantity for July, we need to follow these steps:
     • Step 1: Calculate the planned sales for July
     • Planned sales for July = 300 units
     • Step 2: Calculate the opening stock for July
       • Opening stock for July = 50% of planned sales for July
       • Opening stock for July = 50% x 300 = 150 units
     • Step 3: Determine the total units required for July
       • Total units required for July = Planned sales for July + Opening stock for July
       • Total units required for July = 300 + 150 = 450 units
     • Step 4: Determine the production quantity required for July
       • To determine the production quantity required for July, we need to consider the faulty production. Since 10% of production is faulty, the actual production required to meet the budgeted sales for July is:
       • Actual production for July = Total units required for July / (1 – % of faulty production)
       • Actual production for July = 450 / (1 – 10%) = 500 units
       • Therefore, the actual production quantity for July to achieve the budgeted sales is 500 units.

This work is licensed under a Creative Commons Attribution 4.0 International License.