Asian Lamp Company manufactures lamps. The estimated number of lamp sales for the last three months for the current year are as follows: $$\begin{array} { l r }
\text { Month } & \text { Sales } \
\text { October } & 10,000 \
\text { November } & 14,000 \
\text { December } & 13,000
\end{array}$$ Finished goods inventory at the end of September was 3,000 units. Ending finished goods inventory is budgeted to equal 25 percent of the next month's sales. Asian Lamp expects to sell the lamps for $25 each. January sales is projected at 16,000 lamps. In going from the sales budget to the production budget, adjustments to the sales budget need to be made for
A)finished goods inventories.
B)cash receipts.
C)factory overhead costs.
D)selling expenses.

Question

Asian Lamp Company manufactures lamps. The estimated number of lamp sales for the last three months for the current year are as follows: $$\begin{array} { l r } 
\text { Month } & \text { Sales } \
\text { October } & 10,000 \
\text { November } & 14,000 \
\text { December } & 13,000
\end{array}$$ Finished goods inventory at the end of September was 3,000 units. Ending finished goods inventory is budgeted to equal 25 percent of the next month's sales. Asian Lamp expects to sell the lamps for $25 each. January sales is projected at 16,000 lamps. In going from the sales budget to the production budget, adjustments to the sales budget need to be made for
A)finished goods inventories.
B)cash receipts.
C)factory overhead costs.
D)selling expenses.

Quizplus · Accepted Answer

The production budget is adjusted for finished goods inventories to ensure that production meets both the sales demand and the desired ending inventory levels. Cash receipts, factory overhead costs, and selling expenses are not directly adjusted in the production budget; these are considered in other budgets like the cash budget, manufacturing overhead budget, and selling and administrative expense budget, respectively.

Asian Lamp Company Manufactures Lamps Finished Goods Inventory at the End of September Was 3,000