If total sales are $355000, with beginning and ending inventories of $23000 and $15000 respectively, the total production would be _________?
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Answer: A. $363,000
Explanation
Total production is calculated by adding ending inventory to total sales and subtracting beginning inventory. Adjusting $355000 in sales with inventory changes yields the correct production volume. This reconciles sales with inventory turnover. Inventory equations link sales, production, and storage levels within an accounting period. Manufactured goods not sold become ending inventory, while prior inventory helps meet current sales. Accurate tracking prevents stockouts and overproduction.
Production managers use inventory formulas to schedule factory shifts and material purchases. It prevents tying up excessive working capital in unsold goods. Manufacturers rely on these figures for master budgeting. Option B adds beginning inventory instead of subtracting it. Option C incorporates an improper inventory adjustment sign. Option D overestimates the production volume significantly.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
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