Question

Lexi Company forecasts unit sales of 1,640,000 in April, 1,250,000 in May, 810,000 in June, and 1,650,000 in July. Beginning inventory on April 1 is 250,000 units, and the company wants to have 30% of next month’s sales in inventory at the end of each month. Prepare a merchandise purchases budget for the months of April, May, and June.

Answer 1

Answer:

Explanation:

From the information given in the question:

The main objective is to Prepare a merchandise purchases budget for the months of April, May, and June

                        Merchandise Purchases Budget

                                                 April                  May                 June

Next months' budgeted        1250000            810000          1650000

Sales

Ratio of inventory                  30%                     30%               30%

Desired ending inventory     375000              243000         495000

Sales unit                               1640000             1250000       810000

Required units of

available inventory                2015000             1493000       1305000

Less:Beginning Inventory     -250000             - 375000      - 243000

Units to be purchased           1765000              1118000       1062000

N:B

Desired ending inventory = Next months' budgeted sales × Ratio of inventory  

Required units of available inventory = Desired ending inventory + Sales unit