acct jeporady #2

Question 1

If a company has a beginning merchandise inventory of $40,000, a desired ending merchandise inventory of $20,000, and a budgeted COGS of $250,000, what is the amount of required inventory purchases?

Answer 1

Purchases = Budget + EI – BI = 250,000 + 20,000 – 40,000 = $230,000

Question 2

Budgeted unit sales for March, April, and May are 60,000, 70,000, and 80,000 units. Management wants to maintain an ending inventory equal to 25% of the next month’s unit sales at the end of every month. How many units should be produced in April?

Answer 2

Purchases = Budgeted Sales+ EI – BI = 70,000 + (25%80,000) – (25%70,000) = 82,500 units

EI: 25% premade for May

BI: 25% premade for April in March

Original Equation: BI + Purchases – Sales = EI

Question 3

The budgeted selling price per unit is $50. Budgeted units sales for June, July, and August are 5,000, 7,000, and 10,000. What are the budgeted sales for july

Answer 3

July Sales: $50/unit * 7,000 units = $350,000

Question 4

These are the advantages of budgeting (list at least 3 of 6)

Answer 4

1) Communicate management’s plans throughout organization

2) benchmarks for evaluating subsequent performance

3) Force managers to think about and plan for the future