Motorcycle Manufacturers, Inc. projected sales of 53,500 machines for the year. The estimated January 1 inventory is 6,060 units, and the desired December 31 inventory is 7,130 units. What is the budgeted production (in units) for the year? a. 53,500 b. 52,430 c. 40,310 d. 54,570

To calculate the budgeted production for the year, you need to consider the projected sales, the initial inventory, and the desired ending inventory.

Using the given data: Projected sales for the year = 53,500 units Estimated January 1 inventory (beginning inventory) = 6,060 units Desired December 31 inventory (ending inventory) = 7,130 units

The formula to calculate the budgeted production is: Budgeted Production = Projected Sales + Desired Ending Inventory - Beginning Inventory

Let's plug in the numbers: Budgeted Production = 53,500 units + 7,130 units - 6,060 units Budgeted Production = 54,570 units

So the budgeted production for the year is 54,570 units.

Therefore, the correct answer is d. 54,570.

Extra: Understanding how to calculate the budgeted production is important for managing the supply chain and operations of a business. Here are some key concepts you should understand:

1. Projected Sales: This is an estimate of how many units the company expects to sell during the year. This figure helps businesses plan their production needs.

2. Beginning Inventory: This is the number of units in inventory at the start of the year. It represents the stock that is carried over from the previous year.

3. Ending Inventory: This is the number of units the company wants to have in inventory at the end of the year. Having a sufficient ending inventory ensures that the company can meet customer demand even as it enters the next year.

4. Budgeted Production: This is the number of units the company must produce in order to meet the projected sales and the desired inventory levels. It takes into account the current inventory and the future needs, ensuring that production is aligned with demand.

Businesses use such budgeted figures for planning their manufacturing schedules, purchasing materials, allocating labor, and managing their cash flow to ensure that they can meet demand without overproducing or wasting resources. It's a delicate balance between having enough product to meet customer needs and not having too much capital tied up in unsold inventory.