Norton Company prepared the following sales budget:
$$\begin{array} { | l | l | }
\hline \text { Month } & \text { Budgeted Sales } \
\hline \text { March } & \$ 200,000 \
\hline \text { April } & \$ 180,000 \
\hline \text { May } & \$ 220,000 \
\hline \text { June } & \$ 260,000 \
\hline
\end{array}$$ The expected gross profit rate is 40% and the inventory at the end of February was $36,000. Desired inventory levels at the end of the month are 30% of the next month's cost of goods sold. What is the desired cost of goods sold for May?

Question

Norton Company prepared the following sales budget:
$$\begin{array} { | l | l | } 
\hline \text { Month } & \text { Budgeted Sales } \
\hline \text { March } & \$ 200,000 \
\hline \text { April } & \$ 180,000 \
\hline \text { May } & \$ 220,000 \
\hline \text { June } & \$ 260,000 \
\hline
\end{array}$$ The expected gross profit rate is 40% and the inventory at the end of February was $36,000. Desired inventory levels at the end of the month are 30% of the next month's cost of goods sold. What is the desired cost of goods sold for May?

Quizplus · Accepted Answer

To find the desired cost of goods sold for May, we first calculate the cost of goods sold (COGS) based on the gross profit rate. The gross profit rate is 40%, which means the cost of goods sold rate is 60% (100% - 40%). For May, the budgeted sales are $220,000. Therefore, the COGS for May is 60% of $220,000, which equals $132,000.

Norton Company Prepared the Following Sales Budget The Expected Gross Profit Rate Is 40% and the Inventory