Marty's Merchandise has budgeted sales as follows for the second quarter of the year: Cost of goods sold is equal to 70% of sales. The company wants to maintain a monthly ending inventory equal to 120% of the cost of goods sold for the following month. The inventory on March 31 was below this target and was only $22,000. The company is now preparing a Merchandise Purchases Budget for April, May, and June.
The desired beginning inventory for June is:

Question

Marty's Merchandise has budgeted sales as follows for the second quarter of the year:  Cost of goods sold is equal to 70% of sales. The company wants to maintain a monthly ending inventory equal to 120% of the cost of goods sold for the following month. The inventory on March 31 was below this target and was only $22,000. The company is now preparing a Merchandise Purchases Budget for April, May, and June.
The desired beginning inventory for June is:

Quizplus · Accepted Answer

Desired beginning inventory for June = 120% × 70% × $50,000 = $42,000

Marty's Merchandise Has Budgeted Sales as Follows for the Second