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Walker Company prepares monthly budgets. The current budget plans for a September ending merchandise inventory of...

Walker Company prepares monthly budgets. The current budget plans for a September ending merchandise inventory of 36,000 units. Company policy is to end each month with merchandise inventory equal to 20% of budgeted sales for the following month. Budgeted sales and merchandise purchases for the next three months follow. The company budgets sales of 180,000 units in October.

Sales (Units) Purchases (Units)
July 210,000 228,000
August 300,000 302,000
September 310,000 284,000


Prepare the merchandise purchases budgets for the months of July, August, and September.

Solutions

Expert Solution

WALKER COMPANY
Merchandise purchase budget
For July, August and September
July August September
Budgeted ending inventory 300,000*20% = 60,000 310,000*20% = 62,000 180,000*20% = 36,000
Add: Budgeted units sales                                 210,000                                 300,000                                 310,000
Required units available inventory                                 270,000                                 362,000                                 346,000
Less: Beginning inventory 210,000*20% = 42,000 300,000*20% = 60,000 310,000*20% = 62,000
Units to be purchased                                 228,000                                 302,000                                 284,000

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