Kunal Corporation had sales of $60,000 in August; $80,000 in September; $95,000 in October; $115,000 in November and $145,000 in December. Cost of goods sold has consistently been at 65% of sales. Additionally, Kunal had $45,000 worth of merchandise at the start of August and plans on having inventory on hand worth 20% of next month's cost of goods sold. If all inventory purchases are purchased and paid for in the current month, calculate the amount of inventory purchased and paid for in October.

Question

Quizplus · Accepted Answer

To calculate the amount of inventory purchased and paid for in October, we first determine the cost of goods sold (COGS) for October, which is 65% of October's sales ($95,000). COGS for October = $95,000 * 65% = $61,750. Next, we calculate the desired ending inventory for October, which is 20% of November's COGS (since November's sales are $115,000, November's COGS = $115,000 * 65% = $74,750). Desired ending inventory for October = 20% of $74,750 = $14,950. The beginning inventory for October is the ending inventory of September, which is 20% of October's COGS ($61,750), so $61,750 * 20% = $12,350. The formula for inventory purchases is: Purchases = COGS + Ending Inventory - Beginning Inventory. Therefore, purchases for October = $61,750 + $14,950 - $12,350 = $64,350.

Kunal Corporation Had Sales of $60,000 in August; $80,000 in September;