Walker Company prepares monthly budgets. The current budget plans for a September ending inventory of 38,000 units. Company policy is to end each month with merchandise inventory equal to a specified percent of budgeted sales for the following month. Budgeted sales and merchandise purchases for the next three months follow.

Walker Company prepares monthly budgets. The current budget plans for a September ending inventory of 38,000 units. Company policy is to end each month with merchandise inventory equal to a specified percent of budgeted sales for the following month. Budgeted sales and merchandise purchases for the next three months follow.


Explanation:1.

Merchandise Purchases Budget

September required units
Ending inventory	38,000
Add budgeted sales	300,000
Total required in September	338,000

 

September Beginning Inventory
Total required	338,000
Less budgeted purchases	(278,000)
September beginning inventory	60,000

  

September Beginning Inventory = August Ending Inventory

 

August required units
Ending inventory	60,000
Add budgeted sales	330,000
Total required in August	390,000

 

August beginning inventory
Total required	390,000
Less budgeted purchases	(324,000)
August beginning inventory	66,000

  

August Beginning Inventory = July Ending Inventory

   

July required units
Ending inventory	66,000
Add budgeted sales	160,000
Total required in July	226,000

July Beginning Inventory
Total required	226,000
Less budgeted purchases	(194,000)
July beginning inventory	32,000

 2.

Percent of Sales to be held as Ending Inventory

  

Ending inventory for August	=	60,000	=	20%
September Sales		300,000

   

This percentage is constant for the three months.

3.

October expected sales

 

September Ending Inventory	=	38,000	=	190,000
Required %		20%