Norton Company prepared the following sales budget:
$\begin{array}{|l|r|}
\hline \text { Month } & \text { Budgeted Sales } \
\hline \text { March } & \$ 200,000 \
\hline \text { April } & \$ 180,000 \
\hline \text { May } & \$ 220,000 \
\hline \text { June } & \$ 260,000 \
\hline
\end{array}$
Cost of goods sold is budgeted at 60% of sales, and the inventory at the end of February was $36,000. Desired inventory levels at the end of each month are 30% of the next month's cost of goods sold.
- What is the desired beginning inventory on June 1?

Question

Quizplus · Accepted Answer

The desired beginning inventory on June 1 is calculated as 30% of July's cost of goods sold. Since July's sales are not provided, we use June's cost of goods sold as the closest estimate. June's sales are $260,000, so the cost of goods sold is 60% of that, which equals $156,000. 30% of $156,000 is $46,800.

Norton Company Prepared the Following Sales Budget Cost of Goods Sold Is Budgeted at 60% of Sales