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Troy Company Monthly Budgets: Inventory, Purchases, Ratios

How do I calculate the budget ending inventory for each month? How do I calculate the ratio of ending inventory?

Troy Company prepares monthly budgets. The current budget plans for a September ending inventory of 38,000 units. Company policy is to end each month with merchandise inventory equal to a specified percent of budgeted sales for the following month. Budgeted sales and merchandise purchases for the three most recent months follow.

( 1) Prepare the merchandise purchases budget for the months of July, August, and September.

( 2) Compute the ratio of ending inventory to the next month's sales for each budget prepared in part 1.

( 3) How many units are budgeted for sale in October?

* July budget inventory $64,000

* July Sales (units) $170,000 Purchase (units) $200,000
* August Sales (units) $320,000 Purchase (units) $312,000
* September Sales (units) $280,000 Purchase (units) $262,000.

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The solution discusses the Troy Company Monthly Budgets including inventory, purchases, and ratios.