Production Bugets

A-Vic

ive not come across this but just in case - say in the production budget 10% are faulty goods but have a scrap value of half the price do you just produce demand and add the amount made in scrap value to sales?

*Jo

The way i remember it is.

If 10% of your finished goods are faulty then the demand figure needs to be 90% of your production.

For example if the demand was 100 apples, you would have to produce (100/90x100) 111 to be able to have a 10% loss of 11 apples to bring the total back to 100 to sell.
The strapage of 11 apples would then gain a scrap value which could be added to sales.

If you had a demand for 256 shoes, you would have to produce (256/90x100) 284 to provide for the 10% loss of 28.

N.b. in the above examples i have rounded down, in reality you would round up as you would require a full one of something rather than a fraction.

A-Vic

Was ok on the actual budget calculation just wondered on the scrap value not come across any with a value but had to make sure you just add the figure to sales.

Thanks Jo