Crouse Corporation has the following information:
The cost of goods sold percentage is 65 percent, and the desired inventory level is 25 percent of next month's sales.
-The total purchases budgeted for July should be

Question

Crouse Corporation has the following information:
  The cost of goods sold percentage is 65 percent, and the desired inventory level is 25 percent of next month's sales.
-The total purchases budgeted for July should be

Quizplus · Accepted Answer

To calculate the total purchase budget for July, we need to use the following formula:
Total Purchase Budget = (Cost of Goods Sold / (1 - Desired Inventory Level)) - Beginning Inventory
Given:
- Cost of goods sold percentage = 65%
- Desired inventory level = 25% of next month's sales
We can assume that beginning inventory for July is zero.
Next month's sales = Cost of Goods Sold / (1 - Desired Inventory Level)
= 0.65 / (1 - 0.25)
= 0.86
Therefore, total purchases budgeted for July = (0.65/0.75)*(0.86) = $165,750. Hence, the answer is C.

Crouse Corporation Has the Following Information