Motorcycle Manufacturers, Inc. projected sales of 78,000 machines for the year. The estimated January 1 inventory is 6,500 units, and the desired December 31 inventory is 6,000 units. What is the budgeted production (in units) for the year? Oa. 70,500 b. 77,500 c. 70,000 d. 78,500

To calculate the budgeted production for the year, you need to consider the projected sales, the inventory at the start of the year, and the desired inventory at the end of the year. The formula to calculate budgeted production is:

Budgeted Production = Projected Sales + Desired Ending Inventory - Beginning Inventory

Given: Projected Sales = 78,000 units Desired Ending Inventory (December 31) = 6,000 units Beginning Inventory (January 1) = 6,500 units

Applying the values to the formula:

Budgeted Production = 78,000 + 6,000 - 6,500 Budgeted Production = 78,000 + 6,000 - 6,500 Budgeted Production = 84,000 - 6,500 Budgeted Production = 77,500 units

The correct answer is b. 77,500 units.

Extra: Understanding how to calculate budgeted production is an important aspect of inventory management and production planning. Businesses need to be able to predict how many units they should produce to meet customer demand and to maintain an optimal level of inventory. Having too much inventory can lead to increased storage costs and the risk of inventory obsolescence, while having too little inventory can lead to stockouts and lost sales. By accurately estimating projected sales and desired inventory levels, companies are better positioned to efficiently produce and allocate resources throughout the year. In schools, such concepts are usually taught within subjects like Business Management, Economics, and Mathematics, often under topics related to production, operations, or supply chain management.