The sales budget for Modesto Corp. shows that 20,800 units of Product A and 22,800 units of Product B are going to be sold for prices of $10.80 and $12.80, respectively. The desired ending inventory of Product A is 20% higher than its beginning inventory of 2,800 units. The beginning inventory of Product B is 3,300 units. The desired ending inventory of B is 3,800 units.
Budgeted purchases of Product A for the year would be .

The answer is:

$11.09 (21,360 units)  

Explanation:

To calculate this, let us first lay out the particulars first:

Since the question is on product A, I will focus in product A

Budgeted sales of product A = 20,800 units

Price of 20,800 units of product A = $10.80

Therefore, 1 unit = 10.80 ÷ 20,800 = $0.0005192

Beginning inventory = 2,800 units

Ending Inventory = 20% higher than beginning inventory

= 20/100 × 2,800 = 0.2 × 2,800 = 560 units

Therefore, ending inventory = 560 + 2,800 = 3,360 units

Next, since we know the projected budget sales and the ending inventory, we will calculate the total amount of inventory during the year as follows:

Total = budgeted sales + ending inventory = 20,800 + 3,360 = 24,160 units, but we are told that Modesto Corp. had a beginning inventory of 2,800, hence to calculate the budgeted purchases of product A in units, we will subtract this from the total inventory for the year as follows:

24,160 - 2,800 = 21,360 units

To find the budgeted purchase in dollars, the calculation is done as follows:

1 unit = $0.0005192

∴ 21,360 units = 21,360 × 0.0005192 = $11.09

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