Question

Ming has just received the sales forecast from their supervisor, and is working on the production budget. They are trying to calculate the budgeted units to be produced. What formula does Ming need to use to determine how many units need to be produced to meet the sales forecast and have enough product in inventory?

Answer 1

Ming should use the formula: Budgeted Units to be Produced = Forecasted Sales + Desired Ending Inventory - Beginning Inventory to calculate the number of units that need to be produced to meet the sales forecast and maintain the appropriate inventory levels.

Step-by-step explanation:

Ming needs to calculate the budgeted units to be produced by using a production budget formula that takes into account the forecasted sales, the beginning inventory, and the desired ending inventory. The formula Ming should use is: Budgeted Units to be Produced = Forecasted Sales + Desired Ending Inventory - Beginning Inventory.

This formula helps determine the right number of units that need to be produced to meet sales forecast while maintaining a sufficient level of inventory.

Understanding and applying this formula allows Ming to align production with sales and inventory objectives, ensuring that the company can meet customer demand without overproducing or understocking. It's a crucial step in supply chain management and optimizing production efficiency.