Q5TI - Horngren'S Financial And Managerial Accounting

Question

Camp Company is a sporting goods store. The company sells a tent that sleeps six people. The store expects to sell 250 tents in 2018 and 280 tents in 2019. At the beginning of 2018, Camp Company has 25 tents in Merchandise Inventory and desires to have 5% of the next year’s sales available at the end of the year. How many tents will Camp Company need to purchase in 2018?

Step-by-Step Solution

Answer

The budgeted tents to be purchasedin 2018 are 239.

Step 1: Meaning of Purchase Budget

The purchase budget determines the number of units that needs to be purchased during a financial year or a particular period to meet the projected sales

Step 2: Preparation of production budget

Particulars	2018
Budgeted tents to be sold	250
Add: Desired tents in ending inventory	14
Total tents needed	264
Less: Tents in beginning inventory	25
Budgeted tents to be purchased	239