Question

Gadget toys expects the following sales in units in the last quarter (Oct-Dec) of 2019: Oct 22,000; Nov 29,000; Dec 33,000 and 30,000 for January 2020. The business has inventory of 24,000 finished units on hand at 1st October and has a target finished inventory of 50% of the following month’s sales units. The units are purchased for $10 and sold for $16 each. Payment for purchases is made in the month following purchase. Accounts payable for purchases as at 30 September was $130,000.

Prepare the purchases budget for the quarter October – December 2019 (showing each month and the total for the quarter) You do need to include the expected payments for purchases.

Answer 1

The answer has been presented in the supporting sheet. For detailed answer refer to the supporting sheet.