Walker Company prepares monthly budgets. The current budget plans for a September ending merchandise inventory of 30,000 units. Company policy is to end each month with merchandise inventory equal to 15% of budgeted sales for the following month. Budgeted sales and merchandise purchases for the next three months follow. The company budgets sales of 200,000 units in October. Sales (Units) Purchases (Units) July 180,000 200,250 August 315,000 308,250 September 270,000 259,500 a. Prepare the merchandise purchases budgets for the months of July, August, and September.

Preparation of merchandise purchases budgets for the months of July, August, and September is shown below:-

Explanation:

                                  Walker Company

                       Merchandises Purchase Budget

                        For July, August , September

                                                             July        August      September

Budgeted ending inventory units        47,250  40,500      30,000

Add: Budgeted unit sales for month  180,000  315,000    270,000

Required units available inventory     227,250  355,500   300,000

Less: Beginning inventory units          27,000   47,250      40,500

Units to be purchased                         200,250  308,250   259,500

Working Note 1

September required units

Ending inventory                         30,000

Add: Budgeted sales                  270,000

Total required in September      300,000

Working Note 2

September Beginning inventory

Total required                               300,000

Less: Budgeted purchases          259,500

September beginning inventory  40,500

Working Note 3

Beginning inventory of September = Ending inventory of August

Working Note 4

August required units

Ending inventory           40,500

Add: Budgeted sales    315,000

Total required in August 355,500

Working Note 5

August beginning inventory

Total required                        355,500

Less: Budgeted purchases308,250

August beginning inventory  47,250

Working Note 6

Beginning inventory of August = Ending inventory of July

Working Note 7

July required units

Ending inventory           47,250

Add: Budgeted sales     180,000

Total required in July      227,250

Working Note 8

July beginning inventory

Total required                         227,250

Less: Budgeted purchases    200,250

July beginning inventory        27,000

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