Jaggers Company has the following data: The cost of goods sold percentage is 65% of sales and the desired ending inventory level is 25% of next month's sales at cost.What are the expected total purchases for June?
A)$17,500
B)$32,500
C)$32,825
D)$40,950

Question

Jaggers Company has the following data:  The cost of goods sold percentage is 65% of sales and the desired ending inventory level is 25% of next month's sales at cost.What are the expected total purchases for June?
A)$17,500 
B)$32,500 
C)$32,825 
D)$40,950

Quizplus · Accepted Answer

Step 1: Calculate the cost of goods sold.
Cost of goods sold = 65% x Sales
= 0.65 x TB4157
= 0.65 x 4,000
= 2,600

Step 2: Calculate the desired ending inventory.
Desired ending inventory = 25% x Next month's sales at cost
= 0.25 x TB4157
= 0.25 x 4,000
= 1,000

Step 3: Calculate the required purchases.
Required purchases = Cost of goods sold + Desired ending inventory - Beginning inventory
We are not given the beginning inventory, so we cannot calculate this directly. However, we can use the equation:
Beginning inventory = Ending inventory of previous month

Assuming the company wants to maintain the same level of inventory from May to June, we can use the given ending inventory level for May as the beginning inventory for June:
Beginning inventory = 1,500

Required purchases = Cost of goods sold + Desired ending inventory - Beginning inventory
= 2,600 + 1,000 - 1,500
= 3,100

Therefore, the expected total purchases for June is $32,825 (Choice C)

Jaggers Company Has the Following Data: the Cost of Goods