Skymont Company wants an ending inventory each month equal to 30% of that month's cost of goods sold.Cost of goods sold for February is projected at $45,000.Ending inventory at the end of January was $12,000.Based on this information,purchases for February would be:
A) $31,500.
B) $46,500.
C) $43,500.
D) $33,000.

Question

Quizplus · Accepted Answer

To calculate the purchases for February, first determine the desired ending inventory for February, which is 30% of February's cost of goods sold ($45,000). So, the desired ending inventory is $45,000 * 30% = $13,500. The beginning inventory for February is the ending inventory from January, which is $12,000. The formula to calculate purchases is: Purchases = Cost of Goods Sold + Desired Ending Inventory - Beginning Inventory. Plugging in the numbers: Purchases = $45,000 + $13,500 - $12,000 = $46,500.

Skymont Company Wants an Ending Inventory Each Month Equal to 30