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    PracticeCPA®CPA BAR Practice Exam 5Question 43
    Easy1 markMultiple Choice
    Area I: Business AnalysisBudgetingProduction Budget

    CPA · Question 43 · Area I: Business Analysis

    A company is preparing its budget. It expects to sell 10,000 units. It wants to have 2,000 units in ending inventory. Beginning inventory is 1,500 units. How many units must be produced?

    Answer options:

    A.

    10,000

    B.

    10,500

    C.

    9,500

    D.

    11,500

    How to approach this question

    Formula: Needs = Sales + Ending Inventory. Production = Needs - Beginning Inventory.

    Full Answer

    B.10,500✓ Correct
    B
    Units to Produce = Budgeted Sales + Desired Ending Inventory - Beginning Inventory. 10,000 + 2,000 - 1,500 = 10,500 units.

    Common mistakes

    Reversing the signs for beginning and ending inventory.
    Question 42All questionsQuestion 44

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