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    Production Budget and Inventory and Projected Sales

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    The Peanut Processing Company produces cans of peanuts. The company expects sales of 15,000 cans in January, 16,000 cans in February, 17,000 cans in March, and 17,000 cans in April. There are 1,500 cans in inventory at the beginning of January. The company tries to maintain a monthly ending inventory of cans of peanuts equal to 10% of the next months projected sales.

    Prepare a production budget for the company for the months of January, February, and March.

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    Solution Preview

    Production Budget = Expected Sales, less beginning balance, plus needed inventory for the following month

    January Production Budget:
    15,000 - Expected Sales
    1,500 - beginning ...

    Solution Summary

    This solution provides a projected production budget based on the existing inventory, projected sales and the requisite end of month inventory.