Fosnight Enterprises prepared the following sales budget:

The expected gross profit rate is 30% and the inventory at the end of February was $10,000.Desired inventory levels at the end of the month are 20% of the next month's cost of goods sold.
What are the total purchases budgeted for April?

Question

Fosnight Enterprises prepared the following sales budget:

The expected gross profit rate is 30% and the inventory at the end of February was $10,000.Desired inventory levels at the end of the month are 20% of the next month's cost of goods sold.
What are the total purchases budgeted for April?

Quizplus · Accepted Answer

C)
Cost of Goods Sold = $13,000 × 70% = $9,100
Ending Inventory = $12,000 × 70% = 8,400 × 20% = $1,680
Beginning Inventory = $13,000 × 70% = 9,100 × 20% = $1,820
Now: CGS $9,100 + EI 1,680 - BI 1,820 = Purchases $8,960

Fosnight Enterprises Prepared the Following Sales Budget