Walker Company prepares monthly budgets. The current budget plans for a September ending merchandise inventory of 19,000 units. Company policy is to end each month with merchandise inventory equal to 10% of budgeted sales for the following month. Budgeted sales and merchandise purchases for the next three months follow. The company budgets sales of 190,000 units in October. Sales (Units) Purchases (Units) July 190,000 203,000 August 320,000 318,000 September 300,000 289,000 Prepare the merchandise purchases budgets for the months of July, August, and September.

The correct answer for July is 203,000 units, August is 318,000 units, and September is 289,000 units.

Explanation:

According to the scenario, the computation of the given data are as follows:

Units to Purchase  = Budget ending inventory + budget units sales - Beginning inventory

So, Units to purchase in July = ( 320,000 × 10%) + 190,000 - ( 190,000 × 10%)

= $32,000 + 190,000 - 19,000

= 203,000

Units to purchase in August = ( 300,000 × 10%) + 320,000 - ( 320,000 × 10%)

= $30,000 + 320,000 - 32,000

= 318,000

Units to purchase in September = 19,000 + 300,000 - ( 300,000 × 10%)

= $19,000 + 300,000 - 30,000

= 289,000

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