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 130,000 April 200,000 February 170,000 May 180,000 March 190,000 June 250,000Beginning inventory for 2010 is 40,000 units. The budgeted inventory at the end of a month is 40 percent of units to be sold the following month. Purchase price per unit is $6. Prepare a purchases budget in units and dollars for each month, January through May.

Answer 1

Results are below.

Step-by-step explanation:

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

Purchases= production + desired ending inventory - beginning inventory

Purchases January:

Production= 130,000

Desired ending inventory= (170,000*0.4)= 68,000

Beginning inventory= (40,000)

Total purchase in units= 158,000

Total purchase cost= 158,000*6= $948,000

Purchases February:

Production= 170,000

Desired ending inventory= (190,000*0.4)= 76,000

Beginning inventory= (68,000)

Total purchase in units= 178,000

Total purchase cost= 178,000*6= $1,068,000

Purchases March:

Production= 190,000

Desired ending inventory= (200,000*0.4)= 80,000

Beginning inventory= (76,000)

Total purchase in units= 194,000

Total purchase cost= 194,000*6= $1,164,000

Purchases April:

Production= 200,000

Desired ending inventory= (180,000*0.4)= 72,000

Beginning inventory= (80,000)

Total purchase in units= 192,000

Total purchase cost= 192,000*6= $1,152,000

Purchases May:

Production= 180,000

Desired ending inventory= (250,000*0.4)= 100,000

Beginning inventory= (72,000)

Total purchase in units= 208,000

Total purchase cost= 208,000*6= $1,248,000