Question

Stritch Company is trying to decide how many units of merchandise to order each month. The company's policy is to have 20% of the next month's sales in inventory at the end of each month. Projected sales for August, September, and October are 24,000 units, 14,000 units, and 34,000 units, respectively. How many units must be purchased in September

Answer 1

Purchases budget = 18,000 units

Step-by-step explanation:

Purchases budget = Sales + closing inventory - opening inventory

Closing inventory for September = 20% of august sales = 20% × 34,000=6,800

Opening inventor for September = 20%× September = 20% × 14,000= 2800

Purchases budget for September = 14,000 + 6,800 - 2,800 = 18,000

Purchases budget = 18,000 units