Richard Inc.expects to sell 28,000 units.Each unit requires 4 pounds of direct materials at $15 per pound and 3 direct labor hours at $12 per direct labor hour.The overhead rate is $9 per direct labor hour.The beginning inventories are as follows: direct materials,2,500 pounds;finished goods,3,100 units.The planned ending inventories are as follows: direct materials,4,000 pounds;finished goods,3,200 units.
-What is the planned production of Richard?
A)21,700
B)28,100
C)27,900
D)34,300

Question

Richard Inc.expects to sell 28,000 units.Each unit requires 4 pounds of direct materials at $15 per pound and 3 direct labor hours at $12 per direct labor hour.The overhead rate is $9 per direct labor hour.The beginning inventories are as follows: direct materials,2,500 pounds;finished goods,3,100 units.The planned ending inventories are as follows: direct materials,4,000 pounds;finished goods,3,200 units. 
-What is the planned production of Richard?
A)21,700
B)28,100
C)27,900
D)34,300

Quizplus · Accepted Answer

To determine the planned production, we need to take into account the beginning and planned ending inventories of finished goods.

Beginning finished goods inventory = 3,100 units 
Planned ending finished goods inventory = 3,200 units 
Expected sales = 28,000 units

Therefore, the planned production would be:

Planned production = Expected sales + Planned ending finished goods inventory - Beginning finished goods inventory 
Planned production = 28,000 + 3,200 - 3,100 
Planned production = 28,100 units

Therefore, the best choice is B, with an explanation as shown above.