Wallace Company provides the following data for next year:

The gross profit rate is 30% of sales. Inventory at the end of December is $30,600 and target ending inventory levels are 10% of next month's sales, stated at cost.
What is the amount of purchases budgeted for February?

Question

Wallace Company provides the following data for next year:

The gross profit rate is 30% of sales. Inventory at the end of December is $30,600 and target ending inventory levels are 10% of next month's sales, stated at cost.
What is the amount of purchases budgeted for February?

Quizplus · Accepted Answer

Budgeted purchases for February = $79,310 ($77,700* -$7,770 + $9,380**)
*$111,000 × (100% - 30%) = $77,700
**$134,000 × (100% - 30%) × 10% = $9,380

Wallace Company Provides the Following Data for Next Year