Question

Walker Company prepares monthly budgets. The current budget plans for a September ending merchandise inventory of 30,000 units. Company policy is to end each month with merchandise inventory equal to 15% of budgeted sales for the following month. Budgeted sales and merchandise purchases for the next three months follow. The company budgets sales of 200,000 units in October. Prepare the merchandise purchases budgets for the months of July, August, and September.

Short answer

The total number of units to be purchased in the month of July, August and September by Walker Company are 200,250 units, 308,250 units and 259,500 units.

Step-by-step solution

Introduction

The total number of units to be purchased will be calculated using the beginning and ending inventory.

Preparation of the merchandise purchases budgets

Walker Company
Merchandise purchase budget
For the month of July, August and September
Particulars	July	August	September
Budgeted ending inventory	47,250	40,500	30,000
Add: Budgeted units of sales	180,000	315,000	270,000
Required units of available inventory	227,250	355,500	300,000
Less: Beginning inventory	27,000	47,250	40,500
Units to be purchased	200,250	308,250	259,500