Blue Wave Co. predicts the following unit sales for the coming four months: September, 3,200 units; October, 4,300 units; November, 6,700 units; and December, 7,800 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 2,800 finished units on hand. Prepare a production budget for each of the months of September, October, and November.

September 3,380, October 5,740, November 7,360

Explanation:

Blue wave co production budget for the month of September, October, and November

September. October. November

$ $ $

Budgeted Sales. 4,300. 6,700. 7,800

Percentage of finished

Good inventory. 60% 60% 60%

Budgeted ending inventory 2,580. 4,020. 4,680

Add: Budgeted Sales. 3,200. 4,300. 6,700

Unit of production. 5,780. 8,320. 11,380

Less: Beginning inventory. 2,400. 2,580. 4,020

Unit produced. 3,380. 5,740. 7,360

Workings

Budgeted ending inventory

September = 60% × 4,300 = 2,580

October = 60% × 6,700 = 4,020

November = 60% × 7,800 = 4,680

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