Walker Company prepares monthly budgets. The current budget plans for a Septembe
ID: 2583055 • Letter: W
Question
Walker Company prepares monthly budgets. The current budget plans for a September ending inventory of 42,000 units. Company policy is to end each month with merchandise inventory equal to a specified percent of budgeted sales for the following month. Budgeted sales and merchandise purchases for the next three months follow
July August September Sales (Units) 160,000 300,000 280,000 Purchases (Units) 188,000 296,000 266,000 (1) Prepare the merchandise purchases budget for the months of July, August, and September WALKER COMPANY Merchandise Purchases Budget For July, August, and September July August September Budgeted ending inventory unit:s 42,000 udgeted units sales for month Required units of available inventory eginning inventory (units) Units to be purchased 188,000 296,000 266,000 (2) Compute the ratio of ending inventory to the next month's sales. July August September Budgeted ending inventory units Next month's budgeted sales Ratio of inventory to next month's sales 42,000 (3) How many units are budgeted for sale in October? Units budgeted for sale in OctoberExplanation / Answer
1. Let's find out budgeted beginning inventory in firts table :-
Always remember :- Beginning Inventory = (Sales + Ending Inventory - Purchases)
2. Now we will find out ratio of ending inventory to next month's sales
Ending Inventory
(As per above statement)
Next Months Sales
(As per above statement)
210,000
How? = (42,000/20*100)
20 % (Assumed as ratio in every previous month is 20%)
3. Budgeted sales for October has been derived by using ratio of previous two months i.e. 20%.
Please check this how it is derived = (42,000/20*100) = (Ending Inventory/Ratio*100) = 210,000
Particulars July August September Ending Inventory 60,000 (a) 56,000 (a) 42,000 (a) Sales 160,000 (b) 300,000 (b) 280,000 (b) Required Units of Inventory 220,000 ((c)=(a)+(b)) 356,000 ((c)=(a)+(b)) 322,000 ((c)=(a)+(b)) Units to be purchased 188,000(d) 296,000 (d) 266,000 (d) Beginning Inventory 32,000 ((e)=(c)-(d)) 60,000 ((e)=(c)-(d)) 56,000 ((e)=(c)-(d))Related Questions
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