Ending Inventory and Production Budgets

We use the following relationship to forecast production requirements:

• Required production in units= Budgeted sales in unites + Budgeted ending inventory – Budgeted in beginning inventory

Three estimates required to forecast production:

• Budgeted sales in units.
• Budgeted ending inventory.
• Budgeted beginning inventory.

Estimated units in beginning and ending inventories based on inventory policies and/or market conditions.