December of the previous year 10,000 January 40,000 February 60,000 March 100,00

Question

December of the previous year 10,000

January                                                40,000

February                                  60,000

March                                      100,000

April                                        70,000

Prepare a purchases budget for January through March, and the first quarter in total. Assume that the company only sells one product that can be purchased at $15.00 per unit. The market for this product is very competitive and customers highly value service such as quality and on time delivery of the product. Also assume that currently it is company policy that ending inventory should equal 50% of next month’s projected sales.

Explanation / Answer

purchase cost = $15

therefore purchase cost      $ 675000    $1237500 $2118750

January February   March   inventory at the beginning 5000(10000*50%) 22500(45000*50%) 41250(82500*50%) Add:- purchase during the month 40000 60000 100000         closing inventory 45000 82500 141250

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