Stumble Inc. plans to sell 100,000 units in March and 140,000 units in April. Stumble Inc.'s policy is that 15% of the following month's sales must be in ending inventory. On March 1, 13,400 units were in inventory.
It takes 15 minutes of direct labour time to make one unit. Direct labour wages average $20 per hour. Variable overhead is applied at the rate of $3 per direct labour hour. Fixed overhead is budgeted at $44,500 per month.
-Refer to the Figure.How many units are budgeted for production in March?

Question

Quizplus · Accepted Answer

To determine the number of units budgeted for production in March, we need to add the desired ending inventory for April to the expected sales for April and then subtract the beginning inventory for March.

Desired ending inventory for April = 15% of 140,000 = 21,000
Expected sales for April = 140,000
Beginning inventory for March = 13,400

Therefore, units budgeted for production in March = (140,000 + 21,000) - 13,400 = 147,600
However, we only need to produce 100,000 units, so the answer is B) 107,600.