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
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.
- 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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