Question

forrest company manufactures phone chargers and has a policy that ending inventory should equal 25% of the next months budgeted unit sales. octobers ending inventory equals 77,500 units. november and december sales are budgeted to be 310,000 units and 260,000 units, respectively.

prepare the production budget for november.

forrest company
production budget
november

Explanation:

Identify the budgeted sales

Using the Budgeted Sales Units knowledge point, we find November's sales.
November budgeted sales:

$$ \text{Budgeted Sales Units} = 310,000 \text{ units} $$

Calculate desired ending inventory

Using the Ending Inventory Policy knowledge point, we calculate November's ending inventory.
The policy requires ending inventory to equal \(25\%\) of the next month's (December's) budgeted sales.
December budgeted sales: \(260,000 \text{ units}\).

$$ \text{Desired Ending Inventory} = 260,000 \times 25\% = 65,000 \text{ units} $$

Determine total required units

Using the Production Budget knowledge point, we sum sales and desired ending inventory.
This gives the total units needed for the month.

$$ \text{Total Required Units} = 310,000 + 65,000 = 375,000 \text{ units} $$

Determine beginning inventory

Using the Beginning Inventory Determination knowledge point, we find November's beginning inventory.
The beginning inventory for November is equal to the ending inventory of October.

$$ \text{Beginning Inventory} = 77,500 \text{ units} $$

Calculate units to produce

Using the Production Budget knowledge point, we subtract beginning inventory from total required units.
This yields the final production requirement.

$$ \text{Units to Produce} = 375,000 - 77,500 = 297,500 \text{ units} $$

Answer:

FORREST COMPANY
November
Budgeted sales units	310,000
Desired ending inventory units	65,000
Total required units	375,000
Less: Beginning inventory units	77,500
Units to produce	297,500