Question

Ruiz Co. provides the following sales forecast for the next four months. April May June July Sales (units) 530 610 560 650 The company wants to end each month with ending finished goods inventory equal to 30% of next month's forecasted sales. Finished goods inventory on April 1 is 159 units. Prepare a production budget for the months of April, May, and June

Answer 1

Ruiz Co.

Production Budget

April May June

Sales (units) 530 610 560

Ending inventory 183 168 195

Total units available 713 778 755

Beginning inventory 159 183 168

Production 554 595 587

Step-by-step explanation:

a) Data and Calculations:

Production Budget

April May June July

Sales (units) 530 610 560 650

Ending inventory 183 168 195 0

Total units available 713 778 755 650

Beginning inventory 159 183 168 195

Production 554 595 587 455

b) The production budget shows the units to be produced. Ruiz Co. can begin the budgeting by estimating the sales units (market demand) for each period. The sales unit is then added to the ending inventory to obtain the total units that are available for sale. From this figure, the beginning inventory is deducted to arrive at the units that must be produced to meet the sales target.