A Production Budget Example

The Production Budget

The production budget must be adequate to meet budgeted sales and to provide for the desired ending inventory.

• The management at Royal Company wants ending inventory to be equal to 20% of the following month’s budgeted sales in units.
• On March 31st, 4,000 units were on hand.

Preparing the production budget….

Note: If Royal was a merchandising company it would prepare a merchandise purchase budget instead of a production budget.

Example

Over to you

Take a look and the example and make sure you understand how to create the Production Budget.