Miller Company has the following data:
The gross profit rate is 40 percent, and the inventory at the end of December was $72,000. Desired inventory levels are 30 percent of next month's sales.
-The total purchases budgeted for March should be

Question

Miller Company has the following data:
  The gross profit rate is 40 percent, and the inventory at the end of December was $72,000. Desired inventory levels are 30 percent of next month's sales.
-The total purchases budgeted for March should be

Quizplus · Accepted Answer

First, we need to calculate the cost of goods sold (COGS) in March:
COGS = Sales x (1 - Gross Profit Rate)
We don't have the sales figure, but we can use the desired ending inventory level to calculate it:
Desired Ending Inventory = 30% x Next Month's Sales
$72,000 = 0.3 x Next Month's Sales
Next Month's Sales = $240,000

Now we can calculate the COGS:
COGS = $240,000 x (1 - 0.4) = $144,000

To find the total purchases budgeted for March, we need to add the expected increase in inventory to the COGS figure:
Total Purchases = COGS + Ending Inventory - Beginning Inventory
Beginning Inventory is not given, but we can assume it is equal to the desired ending inventory for February:
Beginning Inventory = $72,000

Total Purchases = $144,000 + $72,000 - $72,000 = $144,000

Therefore, the answer is C) $271,200.

Miller Company Has the Following Data