Merchandising Company Budgets

Merchandising Company Budgets - by cost of the merchandise...

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Merchandising Company Budgets In a merchandising company, the production budget and the three manufacturing budgets—direct  materials, direct labor, and manufacturing overhead—are replaced with the  merchandise  purchases budget . This budget is prepared using the same three components as the production  budget—sales, required ending merchandise inventory, and beginning merchandise inventory. As  with the production budget, the required ending inventory is added to the expected sales to  determine total amount of merchandise needed, and beginning inventory is subtracted from the total  to determine the amount of inventory that needs to be purchased. The number of units is multiplied 
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Unformatted text preview: by cost of the merchandise to complete the merchandise purchases budget. For example, assume The Sunny Beach T-Shirt Company plans to sell 25,000 T-shirts during quarter one, 10,000 during quarter two, 18,000 during quarter three, and 7,500 during quarter four. Given the timing of shipments, it maintains an inventory at the end of each quarter equal to 10% of the next quarter's sales. At a cost of $8 per T-shirt, the company's second quarter merchandise purchases budget is $86,400....
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This note was uploaded on 11/16/2011 for the course ACCT 2310 taught by Professor Staff during the Spring '09 term at Texas State.

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