Cave Hardware's forecasted sales for April, May, June, and July are $200,000, $230,000, $190,000, and $240,000, respectively. Sales are 65% cash and 35% credit with all accounts receivables collected in the month following the sale. Cost of goods sold is 75% of sales and ending inventory is maintained at $60,000 plus 10% of the following month's cost of goods sold. All inventory purchases are paid 22% in the month of purchase and 78% in the following month. What are the budgeted cash payments in June for inventory purchases?

Question

Quizplus · Accepted Answer

To calculate the budgeted cash payments in June for inventory purchases, we need to first calculate the cost of goods sold for June and the cost of inventory purchases in May and June.

Cost of goods sold for June = 75% of $190,000 = $142,500

Cost of goods sold for July = 75% of $240,000 = $180,000

Total cost of goods sold for May and June = Cost of goods sold for June + Cost of goods sold for July + Ending inventory for June
Ending inventory for June = $60,000 + 10% of $180,000 = $78,000
Total cost of goods sold for May and June = $142,500 + $180,000 + $78,000 = $400,500

Cost of inventory purchases in May = Total cost of goods sold for May and June - Cost of goods sold for June
Cost of inventory purchases in May = $400,500 - $142,500 = $258,000

Cash payment for inventory purchases in May = 22% of $258,000 = $56,760

Cash payment for inventory purchases in June = 78% of $258,000 = $201,240

Therefore, the budgeted cash payments in June for inventory purchases is $201,240.

The correct answer is C ($164,385).

Cave Hardware's Forecasted Sales for April, May, June, and July