Merchandise purchases budget

Merchandise purchases budget: a retailer's schedule of required purchases, computed as budgeted cost of goods sold plus desired ending inventory minus beginning inventory.

ByHoang TruongUpdated July 11, 2026

See it move

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A shop budgets cost of goods sold of €60,000 for the month and wants to end the month holding €18,000 of inventory, while it currently holds €14,000. Required purchases are €60,000 plus €18,000 minus €14,000, or €64,000 — beginning inventory subtracts because it is stock the shop already owns.

Where it fits

SubjectManagerial AccountingCoreTopicBudgeting & the Master BudgetCore

The formula

LaTeX

P = C + E - B

Variables

$P$: Required purchases (€)
$C$: Budgeted cost of goods sold (€)
$E$: Desired ending inventory (€)
$B$: Beginning inventory (€)

Gives the euros of merchandise a retailer must purchase in the period to cover budgeted sales and reach the desired ending inventory level.

Check yourself

PracticeCORE

A retailer budgets cost of goods sold of €85,000 for the quarter. It wants ending inventory of €22,000 and currently holds beginning inventory of €25,000. What is the required merchandise purchases budget for the quarter?

Select an answer to check your understanding.