Question

Spelling Company has the following sales projection (in units) for the next six months: Feb: 9500 Mar: 11000 Apr: 8500 May: 12000 Jun: 10000 Jul: 7500 Each unit sells for $30. Spelling has prepared the following sales budget for the quarter of April, May and June: Sales Budget April May June Total Sales in units 8500 12000 10000 30500 Selling price per unit x $30 x $30 x $30 Sales revenue $255000 $360000 $300000 $915000 Spelling's cost of goods sold is 60% of its sales revenue. The company has a policy that it keeps 10% of next months budgeted cost of goods sold as ending inventory. The company had exactly the budgeted amount of inventory on hand at April 1. Prepare a purchases budget on paper or, PREFERABLY, in Excel for the quarter of April, May and June. (If you build your schedule using formulas in excel, multiple attempts will be much faster.) What is the cost of inventory at April 1 (Beginning inventory) What is the budgeted cost of purchases in June? What is the desired cost of inventory at the end of the quarter?

Answer 1

MATERIAL PURCHASE BUDGET
			APRIL	MAY	JUNE	QUARTER	JULY
Budgeted Sales units			8,500	12,000	10,000	30,500	7,500
Sales price per unit			30	30	30	30	30
Budgeted Sales in $			255,000	360,000	300,000	915,000	225,000
Cost of goods sold ratio			60%	60%	60%	60%	60%
Budgeted cost of goods sold			153,000	216,000	180,000	549,000	135,000
Add: Desired Ending Inventory			21,600	18,000	13,500	13,500
Total needs			174,600	234,000	193,500	562,500
Less: Beginning Inventory			15,300	21,600	18,000	15,300
Budgeted Purchase in $			159,300	212,400	175,500	547,200
Budgeted Cost of Sales for Quarter: $ 549,000
Ending inventory at the end of Quarter: $ 13500