ECONOMICS

Detailed explanation-1: -Therefore, in simple equation form, production budget = The sales budget or forecast + Planned inventory to be maintained in the end – Inventory in the beginning.

Detailed explanation-2: -The production budget is designed by the management to estimate the number of products to be manufactured. It is designed based on the sales forecast and the budgeted amount of finished inventory.

Detailed explanation-3: -What is the Production Budget? The production budget calculates the number of units of products that must be manufactured, and is derived from a combination of the sales forecast and the planned amount of finished goods inventory to have on hand (usually as safety stock to cover for unexpected increases in demand).