Purchases Budget in Units and Dollars Budgeted sales of The Music Shop for the first six months of 2014 are as follows: Month Unit Sales Month Unit Sales January 130,000 April 215,000 February 160,000 May 180,000 March 200,000 June 240,000 Beginning inventory for 2014 is 30,000 units. The budgeted inventory at the end of a month is 40 percent of units to be sold the following month. Purchase price per unit is $5. Prepare a purchases budget in units and dollars for each month, January through May.

Instructions are below.

Explanation:

Giving the following information:

Sales:

January 130,000

February 160,000

March 200,000

April 215,000

May 180,000

June 240,000

Beginning inventory for 2014 is 30,000 units.

The budgeted inventory at the end of a month is 40 percent of units to be sold the following month.

The purchase price per unit is $5.

To calculate the production required for each month, we need to use the following formula:

Production= sales + desired ending inventory - beginning inventory

January:

Sales= 160,000

Desired ending inventory= (160,000*0.4)= 64,000

Beginning inventory= (30,000)

Total= 164,000

Total cost= 164,000*5= $820,000

February:

Sales= 130,000

Desired ending inventory= (200,000*0.4)= 80,000

Beginning inventory= (64,000)

Total= 146,000

Total cost= 146,000*5= $730,000

March:

Sales= 200,000

Desired ending inventory= (215,000*0.4)= 86,000

Beginning inventory= (80,000)

Total= 206,000

Total cost= 206,000*5= $1,030,000

April:

Sales= 215,000

Desired ending inventory= (180,000*0.4)= 72,000

Beginning inventory= (86,000)

Total= 201,000

Total cost= 201,000*5= $1,005,000

May:

Sales= 180,000

Desired ending inventory= (240,000*0.4)= 96,000

Beginning inventory= (72,000)

Total= 204,000

Total cost= 204,000*5= $1,020,000

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