Caplico Company has prepared the following sales budget: $$\begin{array} { | l | r | }
\hline \text { Month } & \text { Budgeted Sales } \
\hline \text { March } & \$ 400,000 \
\hline \text { April } & 182,000 \
\hline \text { May } & 220,000 \
\hline \text { June } & 232,000 \
\hline
\end{array}$$ Cost of goods sold is budgeted at 60% of sales,and the inventory at the end of February was $35,000.Desired inventory levels at the end of each month are 20% 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: $$\begin{array} { | l | r | } 
\hline \text { Month } & \text { Budgeted Sales } \
\hline \text { March } & \$ 400,000 \
\hline \text { April } & 182,000 \
\hline \text { May } & 220,000 \
\hline \text { June } & 232,000 \
\hline
\end{array}$$ Cost of goods sold is budgeted at 60% of sales,and the inventory at the end of February was $35,000.Desired inventory levels at the end of each month are 20% of the next month's cost of goods sold.What is the desired beginning inventory on June 1?

Quizplus · Accepted Answer

To find the desired beginning inventory on June 1, we first calculate the cost of goods sold (COGS) for June, which is 60% of June's sales. June's sales are $232,000, so COGS for June is $232,000 * 60% = $139,200. The desired inventory level at the end of May (which is the beginning inventory for June) is 20% of June's COGS, so it is $139,200 * 20% = $27,840.

Caplico Company Has Prepared the Following Sales Budget Cost of Goods Sold Is Budgeted at 60% of Sales,and