Production Budget • Desired ending finished goods inventory is 15% of the budget

Question

Production Budget • Desired ending finished goods inventory is 15% of the budgeted unit sales of the next quarter Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4 Budgeted unit sales 12500 15000 20000 16250 Add desired ending finished goods inventory 7 8 9 5000 Total needs ? ? ? 21250 Less beginning finished goods inventory 2000 10 11 12 Required production in units ? ? ? ? Production Budget • Desired ending finished goods inventory is 15% of the budgeted unit sales of the next quarter Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4 Budgeted unit sales 12500 15000 20000 16250 Add desired ending finished goods inventory 7 8 9 5000 Total needs ? ? ? 21250 Less beginning finished goods inventory 2000 10 11 12 Required production in units ? ? ? ?

Explanation / Answer

Desired finished inventory is 15% of next quater forecasted sales.

Add desired inventory row is calculated as 15% of next quarter sales.

Total needs is calculated by adding the budgeted sales and desired final inventory.

After subtracting the beginning inventory, we will get the required production in units.

Budgeted sales 12500 15000 20000 16250 Add desired inventory 2250 3000 2438 5000 Total needs 14750 18000 22438 21250 Less beginning inventory 2000 2250 3000 2438 Reqd production 12750 15750 19438 18812

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