Blue Wave Co. predicts the following unit sales for the coming four months: September, 3,700 units; October, 4,800 units; November, 6,900 units; and December, 7,800 units. The company's policy is to maintain finished goods inventory equal to 60% of the next month's sales. At the end of August, the company had 2,600 finished units on hand. Prepare a prodiction budget for each of the months of September, October, and November.

Instructions are listed below.

Explanation:

Giving the following information:

Sales:

September = 3,700 units

October = 4,800 units

November = 6,900 units

December = 7,800 units.

The company's policy is to maintain finished goods inventory equal to 60% of the next month's sales. At the end of August, the company had 2,600 finished units on hand.

To calculate the production for each month, we need to use the following formula:

Production = sales + desired ending inventory - beginning inventory

September:

Sales = 3,700

Desired ending inventory = (4,800*0.6) = 2,880

Beginning inventory = (2,600)

Total = 3,980

October:

Sales = 4,800

Desired ending inventory = (6,900*0.6) = 4,140

Beginning inventory = (2,880)

Total = 6,060

November:

Sales = 6,900

Desired ending inventory = (7,800*0.6) = 4,680

Beginning inventory = (4,140)

Total = 7,440

Prepare a prediction budget for each of the months of September, October, and November.

Finished Goods

60%

August 2600

September 2880

October 4140

November 4680

Explanation:

Finished Goods Sell

60%

August 2600

September 2880 3700

October 4140 4800

November 4680 6900

December 7800