MedSupplies Company has budgeted purchases of inventory for December of $140,000. Expected beginning inventory on December 1 and ending inventory on December 31 are $90,000 and $120,000, respectively. If cost of goods sold averages 80% of sales, what are budgeted sales for December?

Question

Quizplus · Accepted Answer

We can use the following formula to find the budgeted sales:

Budgeted sales = Cost of goods sold / (1 - Gross margin percentage)

We are given that cost of goods sold averages 80% of sales, so the gross margin percentage is 20%.

Beginning inventory + Purchases - Ending inventory = Cost of goods sold

Substituting the given values, we have:

$90,000 + Purchases - $120,000 = 80% of budgeted sales
Purchases = $110,000

Budgeted sales = $110,000 / (1 - 20%) = $137,500

Therefore, the best choice is C.

MedSupplies Company Has Budgeted Purchases of Inventory for December of $140,000