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.
Production Budget Calculator Download
The production calculator is available for download in Excel format by following the link below.
Users use this production calculator at their own risk. We make no warranty or representation as to its accuracy and we are covered by the terms of our legal disclaimer, which you are deemed to have read. This is an example of a production budget template that you might use when preparing financial projections in Excel. It is purely illustrative of a production budget software. This is not intended to reflect general standards or targets for any particular company or sector. If you do spot a mistake in the production calculator, please let us know and we will try to fix it.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.