Question

136. Schrank Company is trying to decide how many units of merchandise to order each month. The company's policy is to have 25% of the next month's sales in inventory at the end of each month. Projected sales for August, September, and October are 44,000 units, 34,000 units, and 54,000 units, respectively. How many units must be purchased in September?

136B. The sales budget for Modesto Corp. shows that 21,100 units of Product A and 23,100 units of Product B are going to be sold for prices of $11.10 and $13.10, respectively. The desired ending inventory of Product A is 10% higher than its beginning inventory of 3,100 units. The beginning inventory of Product B is 3,600 units. The desired ending inventory of B is 4,100 units. Budgeted purchases of Product A for the year would be:

Answer 1

Ans:

136.) Sales budget by a company is prepared to get idea about their estimated sales, so that they can estimates purchases to be made for raw material or inventory. Which help them to identify Working Capital requirement for smooth running of business.

Prjected Sale of October Month: 54000 units

Company's Policy towards Closing Inventory : 25% of following Month sales.

So, Closing Inventory for September Month: 54000*25% = 13,500

Projected Sales of September Month = 34,000 units

Opening Inventory of September Month = 34000*25% = 8500 units

Units must be purchased in September = Closing Inventory+ Sales- Opening Inventory.

=13500+34000-8500= 39000 units

136 b.)

Budgeted Purchase for Product A will be:

Desired Closing Inventory = 3100+10% of 3100 = 3410

Estimates Sales= 21,100 units

Opening Inventory = 3100

Budgeted Purchase for Product A = Closing Inventory+ Estimated Sales- Opening Invetory

= 3,410+21,100-3,100 = 21,410 units.