Blue Wave Co. predicts the following unit sales for the coming four months: September: 4,000 units
October: 5,000 units
November 7,000 units
December 7,600 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 2,400 finished units on hand.
Prepare a production budget for each of the months of September, October, November, and December.

Answer and Explanation:

The Preparation of production budget for each of the months of September, October, November, and December is shown below:-

Month                          September         October                November  

Next Month's  

sales in units)              5,000                   7,000                    7,600  

Percentage for ending

inventory                     60%                       60%                       60%  

Ending inventory       3,000                   4,200                       4,560  

Add: Units expected

to be sold                  4,000                   5,000                        7,000  

Total requirements

in units                      7,000                    9,200                        11,560  

Less: beginning

inventory                  2,400                    3,000                         4,200  

Units to be

produced                4,600                      6,200                        7,360

The ending inventory of last month should be the beginning of next month inventory

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