Exercise 20-25A (Algo) Merchandising: Preparation of purchases budgets LO P4 Walker Company prepares monthly budgets. Company policy is to end each month with merchandise inventory equal to 10% of budgeted unit sales for the following month. Budgeted sales and merchandise purchases for the next three months follow. Beginning inventory on July 1 is 21,000 units. The company budgets sales of 220,000 units in October. The merchandise cost per unit is $2. Budgeted sales units Units to purchase July 210,000 221,000 August 320,000 318,000 September 300,000 292,000 Prepare the merchandise purchases budgets for the months of July, August, and September. Beginning inventory (units) Add: Beginning inventory units WALKER COMPANY Merchandise Purchases Budget Next period budgeted sales units Ratio of inventory to future sales Budgeted ending inventory (units) Total required units Add: Beginning inventory units Units to purchase Cost per unit Cost of merchandise purchases July 210,000 August September 320,000 300,000 10% 10% 0 0 10% 0