The sales budget for Modesto Corp. shows that 21,700 units of Product A and 23,700 units of Product B are going to be sold for prices of $11.70 and $13.70, respectively. The desired ending inventory of Product A is 10% higher than its beginning inventory of 3,700 units. The beginning inventory of Product B is 4,200 units. The desired ending inventory of B is 4,700 units. Budgeted purchases of Product A for the year would be:

The budgeted purchases for product A is 22,070 units

Explanation:

The budgeted purchases for product A can be computed by adding sales to closing inventory, then deducting opening inventory as shown below:

Computation of Product A Purchases

Budgeted sales 21,700

Closing inventory (3700*110%) 4.070

Opening inventory (3,700)

Purchases 22,070

Without mincing words, the budgeted purchases of product A is 22.070 units, which is $ 258,219 ($11.70*22,070) in value terms

Budgeted purchase : 22,070 units

Explanation:

The purchases budget can be determined by adjusting he sales budget for closing an d opening inventory.

The budgeted purchases product A cab be determined as follows

=Sales + closing inventory - opening inventory

Closing inventory of product A = 110% * 3,700 = 4070 units

= 21,700 + 4070 - 3,700 = 22,070 units