The sales budget for Modesto Corp. 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 B for the year would be:

Question

The sales budget for Modesto Corp. 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 B for the year would be:

Quizplus · Accepted Answer

To calculate the budgeted purchases of Product B, we need to consider the following:

1. Sales: Modesto Corp. plans to sell 22,000 units of Product B during the year.

2. Beginning inventory: The company has 2,500 units of Product B in its beginning inventory.

3. Desired ending inventory: The company wants to have 3,000 units of Product B in its ending inventory, which is 20% higher than the beginning inventory. This means the desired ending inventory is 2,500 x 1.2 = 3,000 units.

4. Total units needed: To determine the total units of Product B needed, we can use the following formula:

Total units needed = Sales + Desired ending inventory - Beginning inventory
Total units needed = 22,000 + 3,000 - 2,500
Total units needed = 22,500

Therefore, the budgeted purchases of Product B for the year would be 22,500 units, which is closest to choice D (22,500 units).

The Sales Budget for Modesto Corp