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Concept Introduction:
Budgeted purchases: Budgeted purchases are the estimates of purchases of a particular month based on the sales requirement and ending inventory requirement and the budgeted beginning inventory.
This is how we calculate budgeted purchases for a particular month.
Requirement:
To prepare:
Merchandise purchases budget for the months of April, May and June
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Answer to Problem 29QS
Solution:
Lexi Company | |||
Merchandise purchases Budget (in Units) | |||
For the Month of April, May and June | |||
April | May | June | |
Budgeted sales for the Month | 1,040,000 | 1,220,000 | 980,000 |
Add: Ending inventory requirement | 366,000 | 294,000 | 306,000 |
Total units required for the month | 1,406,000 | 1,514,000 | 1,286,000 |
Less: Beginning inventory | 280,000 | 366,000 | 294,000 |
Budgeted purchases | 1,126,000 | 1,148,000 | 992,000 |
Explanation of Solution
First, the ending inventory requirement is calculated
The ending inventory requirement is calculated as under -
The total requirement of the month is calculated.
Given,
• April = 1,040,000 units
• May =1,220,000 units
• June = 980,000 units
Ending inventory –
• April = 366,000, units
• May =294,000 units
• June = 306,000 units
Total requirement for April, May and June –
Now, the budgeted purchases will be calculated as under –
Given, beginning inventory –
• April = 280,000 units
• May = 366,000 units
• June = 294,000 units
Thus, the merchandise purchase budget has been purchased for the months of April, May and June.
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Chapter 22 Solutions
Loose Leaf for Fundamental Accounting Principles
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