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.
FrameworkMaster budgeting
See it move
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.
The formula
Variables
- Units to produce (units)
- Budgeted sales units (units)
- Desired ending finished-goods inventory (units)
- Beginning finished-goods inventory (units)
Check yourself
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?