Bousee Corporation had sales of $45,000 in January; $70,000 in February; $85,000 in March; $105,000 in April and $120,000 in May. Cost of goods sold has consistently been at 75% of sales. Additionally, Fulton had no inventory at the start of January and plans on having inventory on hand worth 15% of next month's cost of goods sold. Half of inventory purchases are paid for in the current month, and the remaining amount in the next month. Given this information, calculate the amount of inventory paid for in February.

Question

Quizplus · Accepted Answer

To calculate the amount of inventory paid for in February, we first need to determine the cost of goods sold (COGS) for each month and then calculate the inventory needed for the next month, based on 15% of the next month's COGS. 1. COGS for each month at 75% of sales:   - January: $45,000 * 75% = $33,750   - February: $70,000 * 75% = $52,500   - March: $85,000 * 75% = $63,750   - April: $105,000 * 75% = $78,750   - May: $120,000 * 75% = $90,0002. Inventory needed at the end of each month for the next month (15% of next month's COGS):   - January for February: $52,500 * 15% = $7,875   - February for March: $63,750 * 15% = $9,562.50   - March for April: $78,750 * 15% = $11,812.50   - April for May: $90,000 * 15% = $13,5003. Payment for inventory is split between the current and next month. Therefore, in February, the company pays for half of the inventory needed for March and the remaining half of the inventory needed for February.   - Half of February's inventory for March: $9,562.50 / 2 = $4,781.25   - Remaining half of January's inventory for February: $7,875 / 2 = $3,937.504. Total inventory paid for in February = Payment for half of February's inventory for March + Remaining half of January's inventory for February:   - $4,781.25 + $3,937.50 = $8,718.75However, the calculation above does not match any of the provided options, indicating a misunderstanding in the question's requirements or a mistake in the calculation process. Given the options and the methodology outlined, none of the calculations directly lead to the provided choices, suggesting a need for clarification or reevaluation of the calculation steps based on the given data and payment structure. Upon reevaluation, the correct approach to find the amount paid in February includes considering the full payment for February's inventory needs (based on March's COGS) and the remaining half of January's inventory (for February). The correct calculation should reflect the total inventory expenses accounted for in February, including both these components. However, without the exact figures aligning with the provided options, the intended correct calculation involves a detailed understanding of the inventory payment structure as described.

Bousee Corporation Had Sales of $45,000 in January; $70,000 in February;