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Financial & Managerial Accounting
Found in: Page 916
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Lexi Company forecasts unit sales of 1,040,000 in April, 1,220,000 in May, 980,000 in June, and 1,020,000 in July. Beginning inventory on April 1 is 280,000 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.

The amount of merchandise purchase for the month of April, May and June will be $1,126,000, $1,148,000 and $992,000.

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Step by Step Solution

Introduction

Beginning inventory represents the amount of inventory an organization has at the beginning of the new financial year. This includes the amount of inventory carried forward from the previous year

Preparation of merchandise purchases budget

Lexi Company

Merchandise purchase budget

For the month of April, May and June

Particulars

April

May

June

Forecasted sales

$1,220,000

$980,000

$1,020,000

Multiply: Inventory percentage

30%

30%

30%

Desired ending inventory

$366,000

$294,000

$306,000

Add: Budgeted sales

$1,040,000

$1,220,000

$980,000

Total

$1,406,000

$1,514,000

$1,286,000

Less: Beginning inventory

$280,000

$366,000

$294,000

Purchase required

$1,126,000

$1,148,000

$992,000

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