# 2013 Budgeting task 2 help

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Registered Posts: 7 Regular contributor ⭐
Hi
Can someone help me with task 2 of the new online tests?
On both of them I am stuck on task 2.

I saved the most recent till last so it would be fresh in my mind and now i am worries as my exam is this afternoon!

AAArrrrrrrrr!!!!!

• Registered Posts: 4 New contributor 🐸
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Hi Jobijo

How I worked it out was like this,

a)
It says the closing inventory(CI) should be 12.5% of the following weeks sales volume, so ...
Week 1 CI is 12.5% of week 2 sales volume, week 2 450 x 12.5% = 56.25 round up to 57.

Saleable products = sales volume - OI + CI = 382 (400 -75 + 57 = 382)

It says 15% of all production fails quality control and is rejected, so therefore the saleable products must equal 85% (100% - 15%)

The rejected production is the 15%

Total manufactured is 100%

b)
800 items x 14 litres = 11,200, there is an 8% waste.
So 11,200 / 92% = 12,173.913 or 12,174 ltr

12,174 ltr - OI 700 + CI 500 = 11,974 ltr

c)
65,000 items X 4 minutes = 260,000 minutes
260,000 / 60 = 4,333.33 or 4,334 hours

20 staff X 175 hours = 3,500 hours
4,334 - 3,500 = 834 hours overtime

d)
7,410 units X 3 minutes = 22,230 minutes
2,230 / 60 = 370.50 hours

370.5 - 350 hours available = 20.5 hours to be subcontracted

20.5 hours X 60 = 1,230 minutes
1,230 / 3 minutes per unit = 410 units to be subcontracted.

Hope you get this in time.
• Registered Posts: 7 Regular contributor ⭐
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Hi Luke
Sorry for the delayed reply….I passed!!
Thank you!!
• Registered Posts: 452
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luke1875 wrote: »
Hi Jobijo

How I worked it out was like this,

a)
It says the closing inventory(CI) should be 12.5% of the following weeks sales volume, so ...
Week 1 CI is 12.5% of week 2 sales volume, week 2 450 x 12.5% = 56.25 round up to 57.

Saleable products = sales volume - OI + CI = 382 (400 -75 + 57 = 382)

It says 15% of all production fails quality control and is rejected, so therefore the saleable products must equal 85% (100% - 15%)

The rejected production is the 15%

Total manufactured is 100%

b)
800 items x 14 litres = 11,200, there is an 8% waste.
So 11,200 / 92% = 12,173.913 or 12,174 ltr

12,174 ltr - OI 700 + CI 500 = 11,974 ltr

c)
65,000 items X 4 minutes = 260,000 minutes
260,000 / 60 = 4,333.33 or 4,334 hours

20 staff X 175 hours = 3,500 hours
4,334 - 3,500 = 834 hours overtime

d)
7,410 units X 3 minutes = 22,230 minutes
2,230 / 60 = 370.50 hours

370.5 - 350 hours available = 20.5 hours to be subcontracted

20.5 hours X 60 = 1,230 minutes
1,230 / 3 minutes per unit = 410 units to be subcontracted.

Hope you get this in time.

Hi Luke,

why do we deduct the open inventory away from the sales volume please? ( i know this is the right answer but can not understand why)

Surely the open inventory is saleable but the closing inventory is not as it needs to be carried over to the next period ..

don't understand this at all

Thanks for calculation above by the way
• Registered Posts: 452
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Screen grab of question

• Registered Posts: 782
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You are being asked how many units you need to actually make (not sell) so you delete the amount of opening inventory as you don't need to make them as they are already there. Similarly you add on the amount of inventory you need to open the next period with, as you need to make it in preparation. This then gets deleted off the number that need to be produced in the next period as you already have them, and the cycle continues.
• Registered Posts: 452
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Nps wrote: »
You are being asked how many units you need to actually make (not sell) so you delete the amount of opening inventory as you don't need to make them as they are already there. Similarly you add on the amount of inventory you need to open the next period with, as you need to make it in preparation. This then gets deleted off the number that need to be produced in the next period as you already have them, and the cycle continues.

Thanks a lot NPS your an absolute wizard makes perfect sense now :001_smile: