Question

Use the following information for the Exercises below.

Ruiz Co. provides the following sales forecast for the next four months:

   

	April		May		June		July
Sales (units)	610		690		640		730

The company wants to end each month with ending finished goods inventory equal to 20% of next month's forecasted sales. Finished goods inventory on April 1 is 122 units. Assume July's budgeted production is 640 units. In addition, each finished unit requires five pounds (lbs.) of raw materials and the company wants to end each month with raw materials inventory equal to 40% of next month’s production needs. Beginning raw materials inventory for April was 1,252 pounds. Assume direct materials cost $5 per pound.

Exercise 20-3 Manufacturing: Production budget LO P1

Prepare a production budget for the months of April, May, and June.

RUIZ CO.
Production Budget
For April, May, and June
	April	May	June
Next month's budgeted sales (units)	690	640	730
Ratio of inventory to future sales	20%
Required units of available production
Units to be produced

Answer 1

	RUIZ CO.
	Production Budget
	For April, May, and June
		April	May	June
A	Next month's budgeted sales (units)	690	640	730
B	Ratio of inventory to future sales	20%	20%	20%
C = A x B	Desired ending inventory of finished goods	138	128	146
D	Budgeted sales units	610	690	640
E = C+D	Required units of available production	748	818	786
F	LESS: Beginning inventory of finished goods	122	138	128
G = E- F	Units to be produced	626	680	658