Segal Company has the following data:
$\begin{array}{ll}\text { Month }&\text { Budgeted Sales }\
\text { May } & \$ 46,000 \
\text { June } & 50,000 \
\text { July } & 52,000 \
\text { August } & 49,000
\end{array}$
The cost of goods sold percentage is 80% of sales and the desired ending inventory level is 25% of next month's sales at cost.What is the beginning inventory on August 1?
A) $4,200
B) $8,450
C) $9,800
D) $10,400

Question

Quizplus · Accepted Answer

The beginning inventory on August 1 is the same as the ending inventory for July, which is 25% of August's sales at cost. August's sales are $49,000, so the cost is 80% of $49,000 = $39,200. Therefore, the ending inventory for July (and beginning for August) is 25% of $39,200 = $9,800.

Segal Company Has the Following Data The Cost of Goods Sold Percentage Is 80% of Sales