Use the information below to answer the following question(s).
Blaney Lumber's forecasted sales for April; May; June; and July are $200,000; $230,000; $190,000; and $240,000; respectively. Sales are 60% cash and 40% credit with all accounts receivables collected in the month following the sale. Cost of goods sold is 75% of sales and ending inventory is maintained at $60,000 plus 10% of the following month's cost of goods sold. All inventory purchases are paid 20% in the month of purchase and 80% in the following month.
-What are Blaney Lumber's budgeted cash payments in June for inventory purchases?

Question

Quizplus · Accepted Answer

To calculate the budgeted cash payments for inventory purchases in June, we first need to determine the cost of goods sold (COGS) for each month and the required inventory purchases. 1. Calculate COGS for each month:- April: $200,000 * 75% = $150,000- May: $230,000 * 75% = $172,500- June: $190,000 * 75% = $142,500- July: $240,000 * 75% = $180,0002. Calculate ending inventory for each month:- April: $60,000 + (10% of May COGS) = $60,000 + ($172,500 * 10%) = $77,250- May: $60,000 + (10% of June COGS) = $60,000 + ($142,500 * 10%) = $74,250- June: $60,000 + (10% of July COGS) = $60,000 + ($180,000 * 10%) = $78,0003. Determine inventory purchases for each month:- April: Required ending inventory for April - Beginning inventory + COGS for April = $77,250 - $0 + $150,000 = $227,250 (since beginning inventory isn't provided, assume it's sufficient for April without additional purchases)- May: Required ending inventory for May - Beginning inventory (April's ending inventory) + COGS for May = $74,250 - $77,250 + $172,500 = $169,500- June: Required ending inventory for June - Beginning inventory (May's ending inventory) + COGS for June = $78,000 - $74,250 + $142,500 = $146,2504. Calculate budgeted cash payments for June:- 20% of June's inventory purchases + 80% of May's inventory purchases- (20% * $146,250) + (80% * $169,500) = $29,250 + $135,600 = $164,850Therefore, the correct answer is D) $164,850.

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