Budgeted sales for the first quarter for Cullison Company, a retailer, are as follows: $\begin{array}{lr}& \text { Budgeted Sales (Units) } \
\text { January } & 75,000 \
\text { February } & 100,000 \
\text { March } & 110,000
\end{array}$ Cullison started the year with an inventory of 7,500 units. The company likes to maintain an inventory equal to 10 per cent of next month's budgeted sales. Budgeted purchases in units for February would be
A)111,000.
B)110,000.
C)101,000.
D)100,000.

Question

Quizplus · Accepted Answer

To calculate budgeted purchases for February, we first determine the desired ending inventory for February, which is 10% of March's budgeted sales (110,000 units). 10% of 110,000 units = 11,000 units. The beginning inventory for February is the desired ending inventory for January, which is 10% of February's budgeted sales (100,000 units), so 10% of 100,000 = 10,000 units. The formula for budgeted purchases is: Budgeted sales + Desired ending inventory - Beginning inventory. For February: 100,000 (February sales) + 11,000 (Desired ending inventory for February) - 10,000 (Beginning inventory for February) = 101,000 units.

Budgeted Sales for the First Quarter for Cullison Company, a Retailer