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Blue Wave Co. predicts the following unit sales for the coming four months: September, 3,800 units;...

Blue Wave Co. predicts the following unit sales for the coming four months: September, 3,800 units; October, 4,000 units; November, 6,800 units; and December, 7,800 units. The company’s policy is to maintain finished goods inventory equal to 70% of the next month’s sales. At the end of August, the company had 2,300 finished units on hand.

Prepare a production budget for each of the months of September, October, and November.

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Answer #1
Production Budget
September, October and November
September October November
Next month’s budgeted sales 4000 6800 7800
Ratio of inventory to future sales 70% 70% 70%
Budgeted ending inventory 2800 4760 5460
Add: Budgeted sales 3800 4000 6800
Required units of available production 6600 8760 12260
Less: Beginning inventory (2300) (2800) (4760)
Units to be produced 4300 5960 7500
Beginning inventory can alternatively be written without parenthesis.
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