Production Budget - Hayes Company believes it can meet...

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Production Budget The production budget shows the units to produce to meet anticipated sales . Production requirements are determined from the following formula. 1 Illustration 20-4 Production requirements formula A realistic estimate of ending inventory is essential in scheduling production requirements. Excessive inventories in one quarter may lead to cutbacks in production and employee layoffs in a subsequent quarter. On the other hand, inadequate inventories may result either in added costs for overtime work or in lost sales.
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Unformatted text preview: Hayes Company believes it can meet future sales requirements by maintaining an ending inventory equal to 20% of the next quarter's budgeted sales volume. For example, the ending finished goods inventory for the first quarter is 700 units (20% anticipated second-quarter sales of 3,500 units). Illustration 20-5 shows the production budget. Illustration 20-5 Production budget The production budget, in turn, provides the basis for the budgeted costs for each manufacturing cost element, as explained below....
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Production Budget - Hayes Company believes it can meet...

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