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    Prepare a Purchases and Production Budget

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    I would like to know how I can setup a production budget for January, February and March. What is the purchases budget in dollars for the month January, February.

    I have the following sales estimations:

    Month Sales

    January 45,000
    February 60,000
    March 90,000
    April 93,000

    Currently I have 10,000 units of finished goods in inventory (01/01). The inventory of finished goods should be equal to 1/3 of the sales for the next month.

    The materials inventory 01/01 are 5.5 million pounds.

    For each unit produced I need 4 hundred pounds of material (1 pound = $10). The inventory levels for materials should be equal to one-fourth of the needs for the next month.

    How can I calculate the budgets and what would be the results?

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    Solution Summary

    The solution prepares a purchases and production budget for the months of January and February.