Question

If the expected sales volume for the current period is 9,000 units, the desired ending inventory is 200 units, and the beginning inventory is 300 units, the number of units set forth in the production budget, representing total production for the current period, is:

Answer 1

This problem can be solved by remembering the BASE acronym. Beginning Add Subtract End is what it stands for. The logic is that you have the goods around at the start of the period (as leftovers). Then you subtract those at the end of the month to avoid double counting.

You also need to add in your anticipated production as well. So we add the beginning 300 (from BASE), add the production of 9000 (what we make) and subtract the ending 200 (from BASE) Our production budget has 300 + 9000 - 200 = 9100.

Thus there are 9100 units in the production budget.