Fairway's April sales forecast projects that 6,000 units will sell at a price of $10.50 per unit. The desired ending inventory is 30% higher than the beginning inventory, which was 1,000 units. Budgeted purchases of units in April would be:
A) 6,000 units.
B) 7,000 units.
C) 6,300 units.
D) 7,300 units.
E) Some other amount.

Question

Quizplus · Accepted Answer

To determine the budgeted purchases of units in April, we need to first calculate the desired ending inventory.

Beginning inventory = 1,000 units

Desired ending inventory = 1,000 units + 30% of 1,000 units = 1,000 units + 300 units = 1,300 units

Total units needed = 6,000 units (sales forecast) + 1,300 units (desired ending inventory) - 1,000 units (beginning inventory)

Total units needed = 6,300 units

Therefore, the budgeted purchases of units in April would be 6,300 units.

Fairway's April Sales Forecast Projects That 6,000 Units Will Sell