 In this discussion, we will discuss the discussion question of describe the production budget and how it is prepared. If we see a discussion question or an essay question like this, we would might want to note that the production budget is part of the master budget. First, a word from our sponsor. Yeah, actually, we're sponsoring ourselves on this one because apparently the merchandisers, they don't want to be seen with us. But that's okay, whatever, because our merchandise is better than their stupid stuff anyways. Like our, trust me, I'm an accountant product line. It's paramount that you let people know that you're an accountant because apparently we're among the only ones equipped with the number crunching skills to answer society's current deep complex and nuanced questions. If you would like a commercial free experience, consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com. Type of process is going to be in accordance with some of the goals of the budgeting process. We could go through the goals of the budgeting process. We then may want to point out that the budgeting process will typically be in some type of order, often starting with the sales budget, ending with those budgeted financial statements, the budgeted income statement, the budgeted balance sheet, the production budget. And remember, we're thinking about producing items. We have inventory that we're typically considering when we're considering this master budget type process. Here we're talking about the production budget, the production of the inventory. So the production budget is typically going to be something that will be in units. We're trying to decide how many units we're going to produce. And therefore to get to the production budget, we must have the sales budget. So you got to have the sales budget because that's going to determine how many units we're going to sell. And so once we know how many units we're going to sell, then we can consider how many units we're going to produce. And those two numbers are not going to be the same necessarily. So we want to make sure to point that out. We need the sales budget because we need to know how much we're going to sell in order to know how many we're going to produce. However, we're not going to produce the same amount that we sell because one, we want to have a beginning inventory. We may have a beginning inventory. We may have units that are already there from the prior time period. And two, we want to give some leeway in case our sales are higher or lower than we expect or higher than, especially higher. So we want to have, we probably want to produce then some more. We want to have some expected ending inventory at the end of the period. So the production budget then will take, hey, what's the beginning inventory last period? What do we want in ending inventory? And then basically decide the units that we're going to need for the production budget. Once we have that, once we say, okay, here's how many units we think we're going to sell, then we're going to do this production budget, figure out how many units that we need to produce in order to meet those sales goals and considering the beginning inventory and the kind of ending inventory, the amount of leeway we want. Then we can move forward and say, okay, now how much raw materials do we need to purchase? What about the dollars that we need to spend on raw materials that we will then convert to the finished goods? How much are we going to need to spend on things like the direct labor in order to achieve these goals? Is there any effect on the factory overhead? And these types of items we can move forward once we have this information. First, the sales budget, which allows us to move forward to the production budget, getting the number of units that we expect to produce.