Paradise Company budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for next year.$\begin{array}{lrr}
&\text {Beginning}&\text { Ending}\
&\text {inventoy}&\text { inventory}\
\text { Raw materials*} &40,000&50,000\
\text {Finished goods } &80,000&50,000\
\end{array}$

* Three pounds of raw materials are needed to produce each unit of finished product.
If Paradise Company plans to sell 480,000 units during next year, the number of units it would have to manufacture during the year would be

A)440,000 units.
B)480,000 units.
C)510,000 units.
D)450,000 units.

Question

Paradise Company budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for next year.$\begin{array}{lrr}
&\text {Beginning}&\text { Ending}\
&\text {inventoy}&\text { inventory}\
  \text {  Raw materials*} &40,000&50,000\
 \text {Finished goods  } &80,000&50,000\
\end{array}$

* Three pounds of raw materials are needed to produce each unit of finished product.
If Paradise Company plans to sell 480,000 units during next year, the number of units it would have to manufacture during the year would be

A)440,000 units.
B)480,000 units.
C)510,000 units.
D)450,000 units.

Quizplus · Accepted Answer

To determine the number of units that Paradise Company would have to manufacture during the year, we need to use the following formula:

Units to manufacture = Units to sell + Ending inventory - Beginning inventory
Units to manufacture = 480,000 + Ending inventory - Beginning inventory

However, we need to convert the ending and beginning inventory levels into units of finished product. To do this, we need to multiply the inventory levels by three (since three pounds of raw materials are needed to produce each unit of finished product).

Beginning inventory = 60,000 * 3 = 180,000 units
Ending inventory = 90,000 * 3 = 270,000 units

Substituting these values into the formula, we get:

Units to manufacture = 480,000 + 270,000 - 180,000 = 570,000 units

Therefore, the correct answer is D, 450,000 units.

Paradise Company Budgets on an Annual Basis for Its Fiscal