# Production Budget Calculator for a Business Plan

This production budget calculator can be used by a manufacturing business to generate an estimate of unit production levels based on forecast sales demand and inventory levels used in our financial projections template

Further information on production budgets can be found in our production budget plan and inventory management tutorial.

## Using the Production Budget Calculator

The production budget calculator, which is available for download below, calculates the production levels needed to satisfy forecast unit sales demand and the required level of ending inventory.

It is important to note that all calculations are in units of production and not monetary amounts.

### 1. Enter the Sales Demand in Units

Firstly enter the sales demand in units for each of the five years. This demand should be based on the revenue forecast used in the financial projections template.

### 2. Enter the Ending Inventory Days

Enter the number of days inventory required at the end of the accounting period. The inventory days depends on a number of factors including for example the lead time from suppliers, and should be the same as that used in the financial projections template.

The production budget calculator calculates the ending inventory based on the inventory days and the unit sales forecast. For example, if the units sales forecast for the year is 1,825 units, and the days inventory required is 60 days, the calculator will return an ending inventory of 60 x 1,825/365 = 300 units.

For further information on inventory days check out our How to Determine Inventory Days tutorial.

### 3. Enter the Beginning Inventory

Enter the number of units of inventory at the start of period one.

The production budget calculator calculates the unit production necessary to satisfy the sales demand and the ending inventory requirements.

### 4. Enter the Reject Allowance Percentage

In any manufacturing environment there are always faulty units produced. Accordingly to allow for this a reject allowance percentage can be entered, and the calculator will work out the number of reject units. If this is not required then enter 0%.

Finally the calculator works out the production budget which is the level of production required to satisfy the unit sales demand, provide the required level of ending inventory, and compensate for the faulty units produced.

The unit production budget generated by the calculator determines the production levels required by the business. The next step is to ensure that there is sufficient manufacturing capacity available in the business plan to meet these requirements, either by amending the production labor available or the capital investment in the production facilities.