From the course: Accounting Foundations: Budgeting

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Merchandising firms purchases budget

Merchandising firms purchases budget

From the course: Accounting Foundations: Budgeting

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Merchandising firms purchases budget

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- Merchandising companies that purchase rather than make their products replace four budgets, the production budget, the direct materials budget, the direct labor budget, and the manufacturing overhead budget used by manufacturing firms, with a single budget, the purchases budget for a merchandising firm. Now, the sales budget and the selling and administrative expense budget are similar to those prepared for manufacturing firms, so we won't discuss those budgets again. Instead, we'll focus on the purchases budget for Wind River, a retail company that buys boats from manufacturers and then sells them to customers. Again, this process is quite similar to what we've already done. First, we need to figure out how many boats Wind River will sell during the period, how many they want to have on hand for the next period, and how many they already have on hand at the start of this period. Now, let's assume that Wind River has four boats in inventory at the start of 2018. Let's also assume…

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