Question

Tyler Co.
Production Budget
April, May and June
	April		May		June
Next month’s budgeted sales (units)
		%		%		%
	0		0		0
Units to be produced	0		0		0

Tyler Co. predicts the following unit sales for the next four months: April, 3,600 units; May, 4,700 units; June, 6,700 units; and July, 3,000 units. The company’s policy is to maintain finished goods inventory equal to 20% of the next month’s sales. At the end of March, the company had 700 finished units on hand.

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

Answer 1

Production budget for the months of April, May, and June

·

	April	May	June
Next month's budgeted sales	4,700	6,700	3,000
Ending inventory percentage	20%	20%	20%
Ending inventory of finished goods	4,700 x 20% = 940	6,700 x 20% = 1,340	3,000 x 20% = 600
Sales units	3,600	4,700	6,700
Total inventory needs	4,540	6,040	7,300
Beginning inventory of finished goods	- 700	- 940	- 1,340
Units to be produced	3,840	5,100	5,960

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