Choice "B" is correct.Mien plans to sell 53,000 units of product Nous, plus increase inventory of Nous by 6,000 units. This implies that 59,000 units must be manufactured, which will require 236,000 (. Since there is already inventory of 50,000 kilos of Loire, only 186,000 kilos will need to be purchased.
Budgeted sales of Nous | 53,000 | units |
Desired increase in Nous inventory | 6,000 | units |
Units of Nous to be manufactured | 59,000 | units |
Kilos of Loire required for each unit of Nous | x 4 |
Total units of Loire required | 236,000 | kilos |
Amount of Loire be used from current inventory | (50,000) | kilos |
Amount of Loire to be purchased | 186,000 | kilos |
Choice "a" is incorrect. The 6,000 units of desired finished goods inventory increases the units of Nous to be manufactured and should be added to the 53,000, not subtracted from it.Choice "c" is incorrect. The increase in Nous inventory must be included in determining the budgeted purchases for October.Choice "d" is incorrect. The 6,000 units of desired finished goods inventory increases the units of Nous to be manufactured and should be added to the 53,000, not subtracted from it. In addition, the reduction of Loire inventory reduces the amount to be purchased, so it should be deducted from the purchase amount rather than added.
