Bronkov Company has the following data:
$\begin{array}{ll}\text { Month }&\text { Budgeted Sales }\
\text { May } & \$ 46,000 \
\text { June } & 50,000 \
\text { July } & 52,000 \
\text { August } & 48,000
\end{array}$
The cost of goods sold percentage is 65% of sales and the desired ending inventory level is 25% of next month's sales at cost.What are the expected total purchases for June?
A) $17,500
B) $32,500
C) $32,825
D) $40,950

Question

Quizplus · Accepted Answer

For June, the cost of goods sold (COGS) is 65% of sales, so COGS = 65% of $50,000 = $32,500. The desired ending inventory for June is 25% of July's sales at cost, which is 25% of 65% of $52,000 = $8,450. The beginning inventory for June is the desired ending inventory for May, which is 25% of June's sales at cost, or 25% of 65% of $50,000 = $8,125. The total purchases for June = COGS for June + Desired ending inventory for June - Beginning inventory for June = $32,500 + $8,450 - $8,125 = $32,825.

Bronkov Company Has the Following Data The Cost of Goods Sold Percentage Is 65% of Sales