The selling price per unit is $40.00 December of the previous year 10,000 Januar

Question

The selling price per unit is $40.00

December of the previous year 10,000

January                                                40,000

February                                  60,000

March                                      100,000

April                                        70,000

2. Prepare a purchases budget for January through March, and the first quarter in total. Assume that the company only sells one product that can be purchased at $15.00 per unit. The market for this product is very competitive and customers highly value service such as quality and on time delivery of the product. Also assume that currently it is company policy that ending inventory should equal 50% of next month’s projected sales.

Explanation / Answer

Purchase Budget January February March Quarter Sales In Units 40,000 60,000 1,00,000 2,00,000 Add: desired Ending Inventory 30,000 50,000 35,000 35,000 Total Units required 70,000 1,10,000 1,35,000 2,35,000 Less: Beginning Inventory 20,000 30,000 50,000 20,000 Units to be purchasd 50,000 80,000 85,000 2,15,000 Purchase price - per unit $15 $15 $15 $15 Purchases in dollars $7,50,000 $12,00,000 $12,75,000 $32,25,000

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