hamsta production budget

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Production Budget

(unit to be produced)



( p )

2

Production Budget

• A firm prepares a production budget after determining the number of units that it expects

to sell (in sales budget)

• A production budget is a plan for acquiring theresources needed to carry out the manufacturing

operations to satisfy the expected sales and

maintain the desired ending inventory



The Operating Budget

Sales Budget

Production Budget

Overhead Budget

Direct Labor Budget

Direct Materials Budgets*

Admin

Expense

Budget

Selling

Expense

Budget

*/ unit of direct materials used ,direct materials purchases, cost of direct materials



• The production budget is a statement of the output by

product and is generally expressed in units

• Also called unit to be produced budget ; abudget that detailed about unit to be produced by

company in the future.

• Include:

– type / quality of unit

– quantity

– time

– etc



Production Planning(production budget is just part of it)

• Plan of routing

(raw material to finished good)

• Plan of lay-out

• Plan of schedulling

• Plan of the organization of production

• Plan of product development

• etc



The total number of units to be produced depends

on many factors, amongs them :

– the budgeted sales – company resources

– the desired units of finished goods ending

inventory

– the units of finished goods beginning inventory

– cost of storage and other policies

– production pattern



Inventory Management



Stability Production Pattern (1)

• Advantages :

– Full employment (minimize/zero social

problem, cost to recruit, etc)

– Machinery and all equiptment used

stable

– Good relation with vendors and financial

institution (in term of financing/credit)




• Disadvantages :

– Inventory cost (storage cost) increase

– Storaging risk increase (shrink of volume,

quality decrease, etc)




Keterangan January February March April

Sales 42.000 60.000 84.000 73.000Inventory

(beginning) 5.000 28.000 33.000 14.000

37.000 32.000 51.000 59.000

Produced 65.000 65.000 65.000 65.000

Inventory(ending)

28.000 33.000 14.000 6.000

ABC EnterpriseProduction Budget

First Quartal

(in unit)



Production Budget

Budgeted sales in units

+ Desired ending inventory of finished goods= Total needs

- Beginning inventory of finished

goods= Units to be produced





Sales 42.000 60.000 84.000 73.000Inventory(ending)

28.000 33.000 14.000 6.000

70.000 93.000 98.000 79.000

Inventory

(beginning) 5.000 28.000 33.000 14.000

Produced 65.000 65.000 65.000 65.000


First Quartal

(in unit)



Fluctuated Production Pattern as

Fluactuated Sales Pattern



10.000 10.000 10.000 10.000

52.000 70.000 94.000 83.000

Inventory

(beginning)

10.000 10.000 10.000 10.000

Produced 42.000 60.000 84.000 73.000


First Quartal

(in unit)



Moderately Fluctuated Production Pattern

than Fluactuated Sales Pattern



11.000 17.000 5.000 4.000

53.000 77.000 94.000 77.000

Inventory

(beginning)

5.000 11.000 17.000 5.000

Produced 48.000 66.000 72.000 72.000


First Quartal

(in unit)



Sales Budget

SaleForecast April May June Quarter

Sales in units 20,000 25,000 35,000 80,000

Selling price

per unit x $30 x $30 x $30 x $30

Total sales $600,000 $750,000 $1,050,000 $2,400,000

Kerry Industrial Products Company

Sales Budget

For the First Quarter Ended June 30, 2007



Production Budget

Kerry expects to have 5,000 units on hand on April 1 andwants to have 30% of the following month’s projected unit

sales on hand at the end of each month.

Kerry expects to have 5,000 units on hand on April 1 andwants to have 30% of the following month’s projected unit

sales on hand at the end of each month.

Determining the budgeted units of production:

Budgeted Budgeted Desired Beginning

Production Sales Ending Inventory(in units) (in units) Inventory (in units)

(in units)

Determining the budgeted units of production:

Budgeted Budgeted Desired Beginning

Production Sales Ending Inventory(in units) (in units) Inventory (in units)

(in units)

= + –



Production Budget

April May June Quarter Budgeted sales in units 20,000 25,000 35,000 80,000

Desired ending inventory 7,500 10,500

Units needed 27,500 35,500

Beginning inventory 5,000 7,500

Budgeted production 22,500 28,000

Kerry Industrial Products Company

Production Budget

For the Quarter Ended June30,2007

30% of June30% of June’’ss

budgeted salesbudgeted sales

30% of June30% of June’’ss

budgeted salesbudgeted sales

uly sales are budgeted at 40,000 units,

hamsta production budget

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