Asked by Adecel Rusty on May 01, 2024
Verified
Sarafiny Corporation is in the process of preparing its annual budget. The following beginning and ending inventory levels are planned for the year. Each unit of finished goods requires 2 grams of raw material. The company plans to sell 720,000 units during the year.The number of units the company would have to manufacture during the year would be:
A) 720,000 units
B) 795,000 units
C) 665,000 units
D) 770,000 units
Finished Goods
Products that have completed the manufacturing process and are ready to be sold.
Raw Material
Basic substances in their natural, modified, or semi-processed state used as inputs to a production process for manufacturing goods.
Beginning Inventory
The value of all inventory held by a company at the start of an accounting period, which includes raw materials, work-in-progress, and finished goods.
- Evaluate required production outputs based on predictions in sales and policies for inventory oversight.
- Summarize anticipated financial considerations, including the cost of goods sold, direct labor fees, and procurement strategies.
Verified Answer
720,000 units x 2 grams per unit = 1,440,000 grams
To determine the number of units the company would have to manufacture during the year, we need to add the amount of raw material required to the beginning inventory level and subtract the ending inventory level:
Beginning inventory level + amount of raw material required - ending inventory level = units to manufacture
Using the information given, we can plug in the numbers and solve:
10,000 grams + 1,440,000 grams - 20,000 grams = 1,430,000 grams
1,430,000 grams / 2 grams per unit = 715,000 units manufactured
715,000 units + 55,000 unit increase in ending inventory = 770,000 units
Therefore, the company would have to manufacture 770,000 units during the year, making choice D the correct answer.
Learning Objectives
- Evaluate required production outputs based on predictions in sales and policies for inventory oversight.
- Summarize anticipated financial considerations, including the cost of goods sold, direct labor fees, and procurement strategies.
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