Exercise 4 (Chapter 14)-Preparing an inventory purchases budget Lewis Company se

Question

Exercise 4 (Chapter 14)-Preparing an inventory purchases budget Lewis Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget. Lewis' policy is to maintain an ending inventory balance equal to 10 percent of the following month's cost of goods sold. April's budgeted cost of goods sold is $40,000. January February March $30,000 $32,000$35,000 Budgeted cost of goods sold Plus: Desired ending inventory 3200? Inventory needed Beginning Inventory Required purchases (on account) $27,200? 33,200 6,000 Required: Complete the inventory purchases budget by filling in the missing amounts.

Explanation / Answer

the following is the required table:

note: current month's beginning inventory is nothing but the last month's closing inventory.

January February March Budgeted cost of goods sold $30,000 $32,000 $35,000 Plus: desired ending invetory (10% * 32,000 , 35,000 , 40,000) $3,200 $3,500 $4,000 Inventory needed $33,200 $35,500 $39,000 Beginning inventory (ending inventory of previous month) 6,000 $3,200 $3,500 Required purchases $27,200 $32,300 $35,500

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