Fundamental Accounting Principles
Fundamental Accounting Principles
24th Edition
ISBN: 9781259916960
Author: Wild, John J., Shaw, Ken W.
Publisher: Mcgraw-hill Education,
Question
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Chapter 22, Problem 29QS
To determine

Concept Introduction:

Budgeted purchases:

Budgeted purchases are the estimates of purchases of a particular month based on the sales requirement and ending inventory requirement and the budgeted beginning inventory.

  Budgeted purchases = Sales requirement+ Ending inventory requirement  Beginning inventory

This is how we calculate budgeted purchases for a particular month.

Requirement:

To prepare:

Merchandise purchases budget for the months of April, May and June

Expert Solution & Answer
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Answer to Problem 29QS

Solution:

Lexi Company
Merchandise purchases Budget (in Units)
For the Month of April, May and June

AprilMayJune
Budgeted sales for the Month
1,040,000
1,220,000
980,000
Add: Ending inventory requirement
366,000
294,000
306,000
Total units required for the month
1,406,000
1,514,000
1,286,000
Less: Beginning inventory
280,000
366,000
294,000
Budgeted purchases1,126,0001,148,000992,000

Explanation of Solution

First, the ending inventory requirement is calculated

The ending inventory requirement is calculated as under -

  Ending inventory requirement = 30 % of Next Months forecasted sales unitsEnding inventory requirement for April =30 %X Forecasted sales units for MayEnding inventory requirement for April =30%X 1,220,000 unitsEnding inventory requirement for April =366,000 unitsEnding inventory requirement for May =30 %X Forecasted sales units for JuneEnding inventory requirement for May =30% X 980,000 unitsEnding inventory requirement for May =294,000 unitsEnding inventory requirement for June =30 %X Forecasted sales units for JulyEnding inventory requirement for June =30% X 1,020,00 unitsEnding inventory requirement for June  = 306,000 units

The total requirement of the month is calculated.

  Total requirement of the month = Forecasted sales units for month+ Ending inventory requirement Given, forecasted sales for the Month −

  • April = 1,040,000 units
  • May =1,220,000 units
  • June = 980,000 units

Ending inventory −

  • April = 366,000, units
  • May =294,000 units
  • June = 306,000 units

Total requirement for April, May and June −

  Total requirement of the month = Forecasted sales units for month+ Ending inventory requirementTotal requirement of the April =1,040,000 units +366,000 unitsTotal requirement of the April =1,406,000 unitsTotal requirement of the May =1,220,000 units+294,000 unitsTotal requirement of the May =1,514,000 unitsTotal requirement of the June =980,000 units+306,00 unitsTotal requirement of the June =1,286,000 units

Now, the budgeted purchases will be calculated as under −

Given, beginning inventory −

  • April = 280,000 units
  • May = 366,000 units
  • June = 294,000 units

  Budgeted purchases for the month = Total requirement of the month  Beginning inventoryBudgeted purchases for the April=1,406,00 units280,000 unitsBudgeted purchases for the  April=1,126,000 unitsBudgeted purchases for the May=1,514,000 units366,000 unitsBudgeted purchases for the May=1,148,00 unitsBudgeted purchases for the June=1,286,000 units294,000 unitsBudgeted purchases for the June =992,000 units

Conclusion

Thus, the merchandise purchase budget has been purchased for the months of April, May and June.

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Chapter 22 Solutions

Fundamental Accounting Principles

Ch. 22 - Prob. 11DQCh. 22 - Prob. 12DQCh. 22 - Prob. 13DQCh. 22 - Prob. 14DQCh. 22 - Prob. 15DQCh. 22 - Prob. 16DQCh. 22 - Budget motivation C1 For each of the following...Ch. 22 - Prob. 2QSCh. 22 - Prob. 3QSCh. 22 - Prob. 4QSCh. 22 - Prob. 5QSCh. 22 - Prob. 6QSCh. 22 - Prob. 7QSCh. 22 - Prob. 8QSCh. 22 - Prob. 9QSCh. 22 - Prob. 10QSCh. 22 - Prob. 11QSCh. 22 - Prob. 12QSCh. 22 - Prob. 13QSCh. 22 - Prob. 14QSCh. 22 - Prob. 15QSCh. 22 - Prob. 16QSCh. 22 - Prob. 17QSCh. 22 - Prob. 18QSCh. 22 - Prob. 19QSCh. 22 - QS 22-20 Cash receipts, with uncollectible...Ch. 22 - Cash receipts, with uncollectible accounts P2...Ch. 22 - Prob. 22QSCh. 22 - Prob. 23QSCh. 22 - Prob. 24QSCh. 22 - Prob. 25QSCh. 22 - Prob. 26QSCh. 22 - Prob. 27QSCh. 22 - Prob. 28QSCh. 22 - Prob. 29QSCh. 22 - Prob. 30QSCh. 22 - Prob. 31QSCh. 22 - Prob. 1ECh. 22 - Prob. 2ECh. 22 - Prob. 3ECh. 22 - Prob. 4ECh. 22 - Prob. 5ECh. 22 - Prob. 6ECh. 22 - Prob. 7ECh. 22 - Prob. 8ECh. 22 - Prob. 9ECh. 22 - Prob. 10ECh. 22 - Prob. 11ECh. 22 - Prob. 12ECh. 22 - Prob. 13ECh. 22 - Prob. 14ECh. 22 - Prob. 15ECh. 22 - Prob. 16ECh. 22 - Prob. 17ECh. 22 - Exercise 22-18 Budgeted cash receipts P2 Jasper...Ch. 22 - Prob. 19ECh. 22 - Prob. 20ECh. 22 - Prob. 21ECh. 22 - Prob. 22ECh. 22 - Exercise 22-23 Manufacturing: Cash...Ch. 22 - Prob. 24ECh. 22 - Prob. 25ECh. 22 - Prob. 26ECh. 22 - Prob. 27ECh. 22 - Prob. 28ECh. 22 - Prob. 29ECh. 22 - Prob. 30ECh. 22 - Prob. 31ECh. 22 - Exercise 22-32A Merchandising: Cash...Ch. 22 - Exercise 22-33A Merchandising: Budgeted balance...Ch. 22 - Prob. 34ECh. 22 - Prob. 35ECh. 22 - Prob. 1APSACh. 22 - Prob. 2APSACh. 22 - Prob. 3APSACh. 22 - Problem 22-4A Manufacturing: Preparation of a...Ch. 22 - Prob. 5APSACh. 22 - Problem 22-6AA Merchandising: Preparation of...Ch. 22 - Prob. 7APSACh. 22 - Prob. 8APSACh. 22 - Prob. 1BPSBCh. 22 - Prob. 2BPSBCh. 22 - Prob. 3BPSBCh. 22 - Problem 22-4B Manufacturing: Preparation of a...Ch. 22 - Prob. 5BPSBCh. 22 - Prob. 6BPSBCh. 22 - Prob. 7BPSBCh. 22 - Prob. 8BPSBCh. 22 - Prob. 22SPCh. 22 - Prob. 1AACh. 22 - Prob. 2AACh. 22 - Prob. 3AACh. 22 - Both the budget process and budgets themselves can...Ch. 22 - BTN 22-4 The sales budget is usually the first and...Ch. 22 - Certified Management Accountants must understand...Ch. 22 - Prob. 4BTNCh. 22 - Prob. 5BTNCh. 22 - To help understand the factors impacting a sales...
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