The sales budget for Carmel shows that 20,000 units of Product A and 22,000 units of Product B are going to be sold for prices of $10 and $12, respectively. The desired ending inventory of Product A is 20% higher than its beginning inventory of 2,000 units. The beginning inventory of Product B is 2,500 units. The desired ending inventory of B is 3,000 units. Budgeted purchases of Product A for the year would be:

Question

Quizplus · Accepted Answer

To calculate the budgeted purchases of Product A, we need to find the total quantity of Product A required for sales and ending inventory.

Total quantity of Product A required for sales = 20,000 units (as per sales budget)

Desired ending inventory of Product A = 2,000 x 1.20 = 2,400 units

Total quantity of Product A required = Sales + Ending inventory = 20,000 + 2,400 = 22,400 units

Since beginning inventory is not given for Product A, we assume that there is no beginning inventory.

Therefore, the budgeted purchases of Product A for the year would be:

Budgeted purchases of Product A = Total quantity of Product A required - Beginning inventory

Budgeted purchases of Product A = 22,400 - 0 = 22,400 units

Hence, Option A is incorrect.

Option C is incorrect as it only considers the sales budget and not the desired ending inventory.

Option D is incorrect as it does not consider the desired ending inventory of Product A.

Option E is incorrect as it is the total quantity of Product B required for sales and ending inventory, and not Product A.

The Sales Budget for Carmel Shows That 20,000 Units of Product