Chu Company provided the following information related to its inventory sales and purchases for December Year 1 and the first quarter of Year 2: $\begin{array}{llcc}
&\text { Dec. Year } 1 &\text { Jan. Year } 2 &\text { Feb. Year } 2 &\text { Mar. Year }\
&\text { (Actual) }&\text {(Budgeted) }&\text {(Budgeted) }&\text {(Budgeted) }\
\text { Cost of goods}& \$41,000 &\$71,000 &\$91,000 &\$ 61,000 \
\text { sold }
\end{array}$
Desired ending inventory levels are 26% of the following month's projected cost of goods sold. Budgeted purchases of inventory in February Year 2 would be:

Question

Chu Company provided the following information related to its inventory sales and purchases for December Year 1 and the first quarter of Year 2: $\begin{array}{llcc}
&\text { Dec. Year } 1 &\text { Jan. Year } 2 &\text { Feb. Year } 2 &\text { Mar. Year }\
&\text { (Actual) }&\text {(Budgeted) }&\text {(Budgeted) }&\text {(Budgeted) }\
\text { Cost of goods}& \$41,000 &\$71,000 &\$91,000 &\$ 61,000 \
\text { sold }
\end{array}$
 Desired ending inventory levels are 26% of the following month's projected cost of goods sold. Budgeted purchases of inventory in February Year 2 would be:

Quizplus · Accepted Answer

To calculate February's budgeted purchases, we need to consider the cost of goods sold for February and March, and the desired ending inventory for February. February's ending inventory should be 26% of March's cost of goods sold: 0.26 * $61,000 = $15,860. February's beginning inventory is 26% of February's cost of goods sold: 0.26 * $91,000 = $23,660. Therefore, February's purchases = February's cost of goods sold + February's ending inventory - February's beginning inventory = $91,000 + $15,860 - $23,660 = $83,200.

Chu Company Provided the Following Information Related to Its Inventory