Exhibit 18-3 Thorne Chemicals makes cleaning solution. The following information is available on December 1, 2011:

-Refer to Exhibit 18-3. Given the information above, budgeted production for December is:

Question

Exhibit 18-3 Thorne Chemicals makes cleaning solution. The following information is available on December 1, 2011:

-Refer to Exhibit 18-3. Given the information above, budgeted production for December is:

Quizplus · Accepted Answer

To calculate the budgeted production for December, we need to use the formula:
Budgeted production = Expected sales + Desired ending inventory - Beginning inventory
Using the information given in the table:
Expected sales = 600 gallons
Desired ending inventory = 25% of next month's expected sales = 150 * 0.25 = 37.5 gallons (rounded to 38)
Beginning inventory = 20% of current month's expected sales = 125 * 0.20 = 25 gallons
Budgeted production = 600 + 38 - 25 = 613 - 25 = 588 gallons
However, there is a constraint that the production cannot exceed the plant capacity of 500 gallons per day. Assuming 22 working days in December (excluding weekends and holidays), the maximum production possible is 500 * 22 = 11,000 gallons. Subtracting the beginning inventory of 25 gallons from this, we get 10,975 gallons available for production in December. Since the budgeted production of 588 gallons is less than this limit, it is feasible to produce. 
Therefore, the answer is C) 142 gallons.

Exhibit 18-3 Thorne Chemicals Makes Cleaning Solution