Irina is a managing partner at a firm and is handling the sales and marketing group. She is currently busy in a new product launch. Sales for the new product are expected to be 250 units in July and 280 units in August. Inventory purchases are made at the beginning of the month, and the firm has a policy to stock 10% of the next month's sales in FG inventory. The cost of the product to the company is $200 per unit, and after a careful analysis, Irina has decided to sell the product at a profit margin of 40%. Irina is expecting a sales return of 7% and factored in a prompt payment discount of 1.5% from its suppliers by paying within the discounted period of 15 days. Determine the budgeted cash payments for the merchandise purchases made in July. (Round your calculations to nearest whole number.)
A) $54,766
B) $50,600
C) $54,766.
D) $55,600

Question

Quizplus · Accepted Answer

Budgeted Cost of Merchandise to be Purchased = (Budgeted Quantity of Merchandise to be Purchased × Budgeted Cost of Merchandise) - Purchase Discount = (278 × $200) - $834 = $54,766. See additional explanation below:
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Irina Is a Managing Partner at a Firm and Is