QS 7-29A Merchandising: Computing purchases LO P4 Lexi Company forecasts unit sa

Question

QS 7-29A Merchandising: Computing purchases LO P4 Lexi Company forecasts unit sales of 1,580,000 in April, 1,290,000 in May, 220,000 in June, and 1160,000 in July. Beginning inventory on April 1 is 320,000 units, and the company wants to have 30% 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. LEXI COMPANY Merchandise Purchases Budget For April, May, and June April 1,290,000 May June Next month's budgeted sales (units) Ratio of inventory to future sales Beginning inventory (units) 220,0001,160,000 30% 30% 30% Required units of available inventory Units to be purchased

Explanation / Answer

LEXI COMPANY Merchandise Purchases Budget For April, May and June April May June Next month's budgeted sales (units) 1,580,000 1,290,000 220,000 Ratio of inventory to future sales 30% 30% 30% Ending inventory 1,290,000 x 30% = 387,000 220,000 x 30% = 6,600 1,160,000 x 30% = 348,000 Total units required 1,967,000 1,296,600 370,000 Beginning inventory 320,000 387,000 6,600 Units to be purchased 1,647,000 909,600 363,400

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