McGuire Industries prepares budgets to help manage the company. McGuire is budgeting forthe fiscal year ended January 31, 2018. During the preceding year ended January 31, 2017, salestotaled $9,200 million and cost of goods sold was $6,300 million. At January 31, 2017, inventorywas $1,700 million. During the upcoming 2018 year, suppose McGuire expects cost of goodssold to increase by 12%. The company budgets next year’s ending inventory at $2,000 million.Requirement1. One of the most important decisions a manager makes is how much inventory to buy. Howmuch inventory should McGuire purchase during the upcoming year to reach its budget?
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
McGuire Industries prepares budgets to help manage the company. McGuire is budgeting for
the fiscal year ended January 31, 2018. During the preceding year ended January 31, 2017, sales
totaled $9,200 million and cost of goods sold was $6,300 million. At January 31, 2017, inventory
was $1,700 million. During the upcoming 2018 year, suppose McGuire expects cost of goods
sold to increase by 12%. The company budgets next year’s ending inventory at $2,000 million.
Requirement
1. One of the most important decisions a manager makes is how much inventory to buy. How
much inventory should McGuire purchase during the upcoming year to reach its budget?
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