Voyager Company has the following data: The cost of goods sold percentage is 80% of sales and the desired ending inventory level is 25% of next month's sales at cost.What is the beginning inventory on August 1?
A)$4,200
B)$8,450
C)$9,600
D)$38,400

Question

Voyager Company has the following data:  The cost of goods sold percentage is 80% of sales and the desired ending inventory level is 25% of next month's sales at cost.What is the beginning inventory on August 1?
A)$4,200 
B)$8,450 
C)$9,600 
D)$38,400

Quizplus · Accepted Answer

To calculate the beginning inventory on August 1, we need to first determine the cost of goods sold (COGS) and the desired ending inventory level for September.

COGS = 80% of sales = 0.8 * TB4157 = $9,600

Desired ending inventory for September = 25% of next month's sales at cost = 0.25 * TB4157 = $3,250

Using the formula:

Beginning Inventory + Purchases - COGS = Ending Inventory

We can rearrange the equation to solve for the beginning inventory:

Beginning Inventory = Ending Inventory - Purchases + COGS

Plugging in the numbers:

Beginning Inventory = $3,250 - Purchases + $9,600

Since we don't have information on purchases, we can simplify the equation by assuming that all inventory on August 1 comes from beginning inventory.

Beginning Inventory = $3,250 - $0 + $9,600 = $12,850

Therefore, the best choice is C, $9,600.

Voyager Company Has the Following Data: the Cost of Goods