Ending Inventory and Production Budgets

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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.

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