Production Budget $-$ how much will we need to produce to meet sales and ending inventory requirements.

Ocean Products, Ltd$.,$ has budgeted sales of its Product A for the next four months as follows:

The company is now in the process of preparing a production budget for the second quarter.

Past experience has shown that end$-$of$-$month inventory levels must equal $5\%$ of the following month's sales.

The inventory at the end of March was $2,000$ units.

a Prepare a production budget for the second quarter;

In your budget, show the number of units to be produced each month and for the quarter in total.

Budgeted sales

Desired units of ending

finished goods inventory

Total needs

Units of beginning

finished goods inventory

Required production in units

b What is the ending inventory level needed at the end of May?

c During the second quarter, now many units in total need to be produced to meet all requirements?