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 May?

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 May?

Quizplus · Accepted Answer

C)
May Beginning Inventory = $12,000 × 70% = 8,400 × 20% = $1,680
May Ending Inventory = $14,000 × 70% = 9,800 × 20% = $1,960
May Cost of Goods Sold = $12,000 × 70% = $8,400
Now $8,400 + 1,960 - 1,680 = $8,680

Fosnight Enterprises Prepared the Following Sales Budget