Wild West Fashion expects the total costs of goods sold to be $30,000 in November and $60,000 in December for one of its young adult suits.Management also wants to have on hand at the end of each month 10 percent of the expected total cost of sales for the following month.What dollar amount of suits should be purchased in November?

Question

Quizplus · Accepted Answer

To determine the dollar amount of suits to purchase in November, we need to calculate the total cost of goods Wild West Fashion wants to have on hand for December.
10% of December's expected total cost of sales is $6,000 ($60,000 x 0.10).
Therefore, the total cost of goods Wild West Fashion should have on hand at the end of November is $66,000 ($60,000 + $6,000).
Since the expected total cost of sales for November is $30,000, Wild West Fashion should only purchase the difference between the total cost of goods it wants on hand at the end of November and the expected total cost of sales for November.
This means that Wild West Fashion should purchase $36,000 worth of suits in November (i.e., $66,000 - $30,000).
Therefore, the best choice is C.

Wild West Fashion Expects the Total Costs of Goods Sold