Question

Purchases Budget in Units and Dollars
Budgeted sales of The Music Shop for the first six months of 2010 are as follows:
Month Unit Sales Month Unit Sales
January 140,000 April 200,000
February 140,000 May 160,000
March 200,000 June 220,000
Beginning inventory for 2010 is 60,000 units. The budgeted inventory at the end of a month is 30 percent of units to be sold the following month. Purchase price per unit is $4.
Prepare a purchases budget in units and dollars for each month, January through May.
The Music Shop
Purchases Budget
January - May, 2010
January February March April May
Purchase units:
Purchase dollars:

Answer 1

Answer:

Results are below.

Explanation:

To calculate the purchases for each month, we need to use the following formula:

Purchases (units)= sales + desired ending inventory - beginning inventory

January (units):

Sales= 140,000

Desired ending inventory= (140,000*0.3)= 42,000

Beginning inventory= (60,000)

Total number of units= 122,000

Total cost= 122,000*4= $488,000

February (units):

Sales= 140,000

Desired ending inventory= (200,000*0.3)= 60,000

Beginning inventory= (42,000)

Total number of units= 158,000

Total cost= 158,000*4= $632,000

March (units):

Sales= 200,000

Desired ending inventory= (200,000*0.3)= 60,000

Beginning inventory= (60,000)

Total number of units= 200,000

Total cost= 200,000*4= $800,000

April (units):

Sales= 200,000

Desired ending inventory= (160,000*0.3)= 48,000

Beginning inventory= (60,000)

Total number of units= 188,000

Total cost= 188,000*4= $752,000

May (units):

Sales= 160,000

Desired ending inventory= (220,000*0.3)= 66,000

Beginning inventory= (48,000)

Total number of units= 178,000

Total cost= 178,000*4= $712,000