Question

Ruiz Co. provides the following sales forecast for the next four months: April May June July Sales (units) . . . . . . . . . . . 500 580 540 620

The company wants to end each month with ending finished goods inventory equal to 25% of next month’s forecasted sales. Finished goods inventory on April 1 is 190 units. Assume July’s budgeted production is 540 units. Prepare a production budget for the months of April, May, and June.

Short answer

The number of units to be purchased for the month of April, May and June are 455 units. 570 units and 560 units.

Step-by-step solution

Introduction

Budgeted production is a term used when the production of goods and services in an organization is done, considering the actual production budget.

Preparation of production budget

Ruiz Co
Production budget
For the month of April, May and June
Particulars	April	May	June
Next months budgeted sales	580	540	620
Multiply: Inventory	25%	25%	25%
Ending inventory	145	135	155
Add: Budgeted sales	500	580	540
Required units	645	715	695
Less: Beginning inventory	190	145	135
Units to be purchased	455	570	560