Coomb's Fashions forecasts sales of $125,000 for the quarter ended December 31.Its gross profit rate is 20% of sales,and its September 30 inventory is $32,500.If the December 31 inventory is targeted at $41,500,budgeted purchases for this quarter should be:

Question

Quizplus · Accepted Answer

The budgeted purchases can be calculated by first determining the cost of goods sold (COGS) and then adjusting for the desired ending inventory and the beginning inventory. COGS is 80% of sales (100% - 20% gross profit rate) = 0.8 * $125,000 = $100,000. The budgeted purchases formula is: COGS + Ending Inventory - Beginning Inventory = Purchases. So, $100,000 + $41,500 - $32,500 = $109,000.

Coomb's Fashions Forecasts Sales of $125,000 for the Quarter Ended