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Formworks Company prepares monthly budgets. The current budget plans for a September ending inventory

Author:
July 19th, 2019

I. Preparation of merchandise purchases budgets (for three periods)

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Formworks Company prepares monthly budgets. The current budget plans for a September ending inventory of 15,000 units. Company policy is to end each month with merchandise inventory equal to a specified percent of budgeted sales for the following month. Budgeted sales and merchandise purchases for the three most recent months follow.
1. Prepare the merchandise purchases budget for the months of July, August, and September.

2. Compute the ratio of ending inventory to the next month’s sales for each budget prepared in part 1.

3. How many units are budgeted for sale in October?

Sales (Units) Purchases (Units)
July………………………………………………….. 120,000 138,000
August…………………………………………….. 210,000 204,000
September……………………………………… 180,000 159,000

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