Caplico Company has prepared the following sales budget: $$\begin{array} { | l | r | }
\hline \text { Month } & \text { Budgeted Sales } \
\hline \text { March } & \$ 400,000 \
\hline \text { April } & 207,000 \
\hline \text { May } & 241,000 \
\hline \text { June } & 248,000 \
\hline
\end{array}$$ Cost of goods sold is budgeted at 40% of sales,and the inventory at the end of February was $34,000.Desired inventory levels at the end of each month are 10% of the next month's cost of goods sold.What is the desired beginning inventory on June 1?

Question

Caplico Company has prepared the following sales budget: $$\begin{array} { | l | r | } 
\hline \text { Month } & \text { Budgeted Sales } \
\hline \text { March } & \$ 400,000 \
\hline \text { April } & 207,000 \
\hline \text { May } & 241,000 \
\hline \text { June } & 248,000 \
\hline
\end{array}$$ Cost of goods sold is budgeted at 40% of sales,and the inventory at the end of February was $34,000.Desired inventory levels at the end of each month are 10% of the next month's cost of goods sold.What is the desired beginning inventory on June 1?

Quizplus · Accepted Answer

The desired inventory at the end of May (beginning of June) is 10% of June's cost of goods sold. June's sales are $248,000, so the cost of goods sold is 40% of $248,000, which is $99,200. Therefore, 10% of $99,200 is $9,920.

Caplico Company Has Prepared the Following Sales Budget Cost of Goods Sold Is Budgeted at 40% of Sales,and