Yosko Company expects to sell 2 comma 000 units of finished product in January and 2 comma 150 units in February. The company has 260 units on hand on January 1 and desires to have an ending inventory equal to 40% of the next month's sales. March sales are expected to be 2 comma 270 units. Prepare Yosko's production budget for January and February.

                                      Production budget

January                             2,600 units

February                             2,198 units

Explanation:

The sales budget is adjusted for the projected opening and closing inventories unit to arrive at the production budget:  

The production budget can be determined using the formula below

Production budget = Sales budget + closing inventory- opening inventory

January production budget

Sales budget = 2,000 units

Closing inventory = 40% × February sales = 40% × 2,150

Opening inventory = 260 units

Production budget for January = 2000 + (40% × 2,150) - 260= 2,600  units

February production budget

Sales budget = 2,150

Opening inventory = January closing inventory = 860  units

Closing inventory  = 40% × March sales= 40% × 2,270

Production budget fro February =  2,150 + (40% × 2,270) - 860= 2,198  units

                                      Production budget

January                             2,600 units

February                             2,198 units

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