Kayla's Toys budgeted sales of $300,000 for the month of November and cost of goods sold equal to 70% of sales.Beginning inventory for November was $50,000 and ending inventory for November is estimated at $55,000.How much are the budgeted purchases for November?

Question

Quizplus · Accepted Answer

Step 1: Calculate the cost of goods sold (COGS)
COGS = 70% x $300,000
COGS = $210,000

Step 2: Calculate the cost of goods available for sale
Beginning inventory + Purchases = Cost of goods available for sale
$50,000 + Purchases = Cost of goods available for sale

Step 3: Calculate the estimated purchases
Cost of goods available for sale - Ending inventory = Estimated purchases
$50,000 + Purchases - $55,000 = Estimated purchases
$-5,000 + Purchases = Estimated purchases
Purchases = $5,000 (since ending inventory is more than beginning inventory, this means that there was less sold and more left in stock. Therefore, purchases are less than COGS)
Estimated purchases = $210,000 - $5,000 = $215,000

Therefore, the budgeted purchases for November are $215,000, which corresponds to choice letter C.

Kayla's Toys Budgeted Sales of $300,000 for the Month of November