Question

Atlantic Surf manufactures surfboards. The company’s sales budget for the next three months is shown below. In addition, company policy is to maintain finished goods inventory equal (in units) to 40% of the next month’s unit sales. As of June 30, the company has 1,600 finished surfboards in inventory, which complies with the policy. Prepare a production budget for the months of July and August.

Short answer

The total units to be produced for the month of July and August will be 5,000 units and 5,300 units.

Step-by-step solution

Given the amounts as

Particulars	Amount
Sales for July	4,000 units
Sales for August	6,500 units
Sales for September	3,500 units
Beginning inventory	1,600 units
Finished goods inventory	40%

Preparation of production budget for the month of July and August

Atlantic Surf
Production budget
For the month of July and August
Particulars	July	August
Budgeted ending inventory
July	2,600 units
August		1,400 units
Add: Budgeted sales	4,000 units	6,500 units
Required units for production	6,600 units	7,900 units
Less: Actual budget	1,600 units	2,600 units
Units to be produced	5,000 units	5,300 units