Production budget

Production budget is the schedule of units a business must manufacture in a period to satisfy sales targets and hit desired ending inventory levels.

ByHoang TruongUpdated June 30, 2026

FrameworkMaster budgeting

See it move

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A waterfall chart builds the production budget in three steps, opening at budgeted sales of 40,000 units. A positive bar of +5,000 adds the desired ending stock, and a negative bar of (3,000) removes opening stock already on hand, arriving at 42,000 units to produce. The chart makes the production budget formula — units to produce equals sales plus desired closing stock minus opening stock — immediately readable as a sequence of inventory adjustments.

Where it fits

SubjectManagerial AccountingCoreTopicBudgeting & the Master BudgetCore

The formula

LaTeX

UP = BS + EI - BI

Variables

$U P$: Units to produce (units)
$B S$: Budgeted sales units (units)
$E I$: Desired ending finished-goods inventory (units)
$B I$: Beginning finished-goods inventory (units)

Check yourself

PracticeCORE

Serafino Candles plans to sell 30,000 units next quarter. The desired closing finished-goods inventory is 4,000 units and the opening inventory is 2,500 units. How many units must be produced?

Select an answer to check your understanding.