Next year's sales forecast 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 per unit, 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

Quizplus · Accepted Answer

The desired ending inventory of Product B is 3,000 units, and the beginning inventory is 2,500 units. So, the net increase in inventory is 3,000 - 2,500 = 500 units. Add this to the forecasted sales of 22,000 units, and we get the total units that need to be purchased: 22,000 + 500 = 22,500 units.

Next Year's Sales Forecast Shows That 20,000 Units of Product