Question

Clare purchases a single product for $15 and sells it for $30. Forecasted sales for the next three months are July 4,000 units, August 6,000 units, September 7,500 units. Clare's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. What are budgeted purchases in units for August?

Answer 1

Budgeted purchases in units for August are 6600 units

Step-by-step explanation:

The budgeted purchases in units for August under the policy followed by the company will be as follows.

The units required to meet August sales are 6000 units.

The opening inventory in August will be 40% of August sales that is 0.4 * 6000 = 2400 units

Thus, the units need to be purchased in August to meet August sales = 6000 - 2400 = 3600 units

In August, we also need to purchase enough units to cover 40% of September sales. Units needed in August for September sales = 0.4 * 7500 = 3000 Units

Purchases in August = Purchases required to meet August sales - Purchases required to meet the desired ending inventory

Purchases in August = 3600 + 3000 = 6600 units