Chapter 20 Homework
2
Blue Wave Co. predicts the following unit sales for the coming four months:
September, 3,100 units; October, 4,500 units; November, 6,300 units; and December,
8,000 units. The company's policy is to maintain finished goods inventory equal to
60% of the next month's sales. At the end of August, the company had 1,700 finished
units on hand.
Prepare a production budget for each of the months of September, October, and
November.
Blue Wave Co.
Production Budget
September, October and November
September
October
November
Next month's budgeted sales (units)
4,500
Ratio of inventory to future sales
60 %
60 %
60 %
Budgeted ending inventory (units)
2,700
Add: Budgeted sales (units)
4,500
Required units to be produced
2,700
4,500
0
Less: Beginning inventory (units)
Units to be produced
2,700
1,800
0