Marvin owns a clothing boutique, and he is in the process of creating a purchases budget for August, which is next month. Marvin has gathered the following budgetary data: Budgeted Sales Volume, 800 units; Target Ending Merchandise Inventory, 250 units; and Beginning Units in Merchandise Inventory, 75 units. The purchase price per unit is $14, and Marvin takes advantage of a $50 purchase discount. What are Marvin's Budgeted Net Purchases for August?

Question

Quizplus · Accepted Answer

To calculate Budgeted Net Purchases, first calculate the Total Quantity of Units to Purchase, which is comprised of units available for Sale minus Beginning Units in Merchandise Inventory. Total Units Available for Sale equals the Budgeted Sales Volume of 800 plus the Target Ending Merchandise Inventory of 250 units for a Total of 1,050. From this value, subtract Beginning Units in Merchandise Inventory of 75 units, and the result is 975 units, and that is the number of units that will need to be purchased. Next, multiply the Units to Purchase by the Purchase Price of $14 per unit, and the Total Budgeted Purchases value will equal $13,650. Finally, you must subtract the $50 Purchase Discount to arrive at the final Net Purchases value of $13,600.

Marvin Owns a Clothing Boutique, and He Is in the Process