Problem
Spelling Company has the following sales projection (in units) for the next six months:
Feb: 17000
Mar: 19000
Apr: 15000
May: 22000
Jun: 18000
Jul: 13000
Each unit sells for $40.
Spelling has prepared the following sales budget for the quarter of April, May and June:
|
Sales Budget
|
|
April
|
May
|
June
|
Total
|
|
Sales in units
|
15000
|
22000
|
18000
|
55000
|
|
Selling price per unit
|
x $40
|
x $40
|
x $40
|
|
|
Sales revenue
|
$600000
|
$880000
|
$720000
|
$2200000
|
Spelling's cost of goods sold is 60% of its sales revenue. The company has a policy that it keeps 10% of next months budgeted cost of goods sold as ending inventory. The company had exactly the budgeted amount of inventory on hand at April 1.
Prepare a purchases budget on paper or, PREFERABLY, in Excel for the quarter of April, May and June. (If you build your schedule using formulas in excel, multiple attempts will be much faster.)
What is the cost of inventory at April 1 (Beginning inventory)
What is the budgeted cost of purchases in May?
What is the desired cost of inventory at the end of the quarter?