Page 155 - P1 Integrated Workbook STUDENT 2018

Budgeting

Example 1

ABC has estimated that sales demand for product X next year will be 10,000
units. There are currently 1,000 units of product X in inventory and ABC would
like to increase this to 1,500 units by the end of the year.

Calculate the budgeted level of production.

Solution

Units produced = sales + closing inventory – opening inventory

Units produced = 10,000 + 1,500 – 1,000 = 10,500 units

By producing 10,500 units ABC will be able to meet their estimated sales
demand (10,000 units) and also their desired increase in inventory of finished
goods (500 units).

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