PRODUTION BUDGET

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
I AM TRYING TO GET THE TRUE UNDERSTANDING OF CALCULATING FAULTY GOODS, FOR EG THEY WOULD SAY UPON PRODUCTION COMPLETION 4% FOUND TO BE FAULTY, HOW DO YOU CALCULATE THIS

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    PRODUTION BUDGET

    If you are given a figure for production, say 100, but you know from experience that there is always 4% faulty production you divide 100 by 96% to achieve the total 'good' production required. It is a similar theory to profit margin. Or alternatively you could simply divide the good production required by 96 and multiply by 100.<BR><BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    PRODUCTION BUDGET

    Lets say that your budgeted sales is 100 unit, so you should produce 100 good unit to meet the forecasted sales, but if you know that upon production completion 4% will be faulty, so if you produced 100 units only you will not be able to meet the forecasted sales because 4% will be faulty.<BR><BR>To achieve the forecasted sales you should produce more than 100 units, so the good production "100 unit"will present 96% only â??as the faulty is 4%â?? and the total 100% will be â??the gross productionâ??<BR><BR>The balance â??calculationâ?? as Birdseyeview wrote.<BR><BR>hope this help<BR> <BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    PRODUCTION BUDGET

    EXCELLENT ANSWERS

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