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23 February, 23:08

Lexi Company forecasts unit sales of 1,600,000 in April, 1,280,000 in May, 930,000 in June, and 1,620,000 in July. Beginning inventory on April 1 is 280,000 units, and the company wants to have 40% of next month's sales in inventory at the end of each month. Prepare a merchandise purchases budget for the months of April, May, and June.

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  1. 24 February, 00:48
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    Month April May June

    Purchases budget 1,832 1,140 1,206

    Explanation:

    Purchase budget is determined as follows:

    Sales budget + closing inventory - opening inventory

    '000

    Month April May June July

    Sales Units 1,600 1,280 930 1,620

    Opening inventory (280) (512) (372)

    Closing inv. (40% of next mth) 512 372 648

    Purchase budget 1,832 1,140 1,206

    Note that the closing inventory for a particular becomes the opening inventory for the next following month.

    For example, the closing inventory figure of April (512) is the opening inventory for May.
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