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Weightless Inc. produces a small and large version of its popular electronic scale. The anticipated unit sales for the scales by sales region are as follows: Bath Gym Scale Scale 24,900 41,800 26,900 28,200 51,800 70,000 East Region unit sales West Region unit sales Total The finished goods inventory estimated for October 1 for the Bath and Gym scale models is 1,500 and 2,400 units, respectively. The desired finished goods inventory for October 31 for the Bath and Gym scale models is 1,100 and 2,600 units, respectively. Prepare a production budget for the Bath and Gym scales for the month ended October 31. WEIGHTLESS INC. Production Budget For the Month Ending October 31 Expected units to be sold Total units required Total units to be produced Units Units Bath Gym Scale Scale
The correct answer and explanation is:
Production Budget for Weightless Inc.
Below is the production budget for the Bath and Gym scales for October:
WEIGHTLESS INC.
Production Budget
For the Month Ending October 31
| Scale Type | Bath Scale | Gym Scale |
|---|---|---|
| Expected unit sales | 76,700 | 98,200 |
| Add: Desired ending inventory | 1,100 | 2,600 |
| Total units required | 77,800 | 100,800 |
| Less: Beginning inventory | 1,500 | 2,400 |
| Total units to be produced | 76,300 | 98,400 |
Explanation
The production budget is a key financial planning tool used to determine the number of units that need to be produced to meet expected demand while maintaining the desired inventory levels. This process involves three main steps: (1) calculating total units required, (2) accounting for inventory adjustments, and (3) deriving the production quantity.
- Expected Unit Sales: These are the anticipated sales figures for October, based on sales projections. For the Bath scale, the total is 24,90024,900 (East Region) + 41,80041,800 (West Region) = 76,700. For the Gym scale, it is 26,90026,900 (East Region) + 71,30071,300 (West Region) = 98,200.
- Desired Ending Inventory: The company wants to end October with specific inventory levels to ensure smooth operations in the following month. The Bath scale’s desired ending inventory is 1,100 units, while the Gym scale’s is 2,600 units.
- Total Units Required: This is the sum of expected sales and desired ending inventory. For the Bath scale, it is 76,700+1,100=77,80076,700 + 1,100 = 77,800. For the Gym scale, it is 98,200+2,600=100,80098,200 + 2,600 = 100,800.
- Beginning Inventory: The inventory on hand at the start of October is subtracted from the total units required. The Bath scale’s beginning inventory is 1,500 units, and the Gym scale’s is 2,400 units.
- Total Units to Be Produced: The final step subtracts the beginning inventory from the total units required. For the Bath scale, 77,800−1,500=76,30077,800 – 1,500 = 76,300, and for the Gym scale, 100,800−2,400=98,400100,800 – 2,400 = 98,400.
These figures ensure adequate production to meet demand and maintain desired inventory levels.