On July 1,the inventory of at Barnett Shoes was $60,000.Because of anticipated back-to-school sales,the owner wants to have an inventory of $105,000 on hand at the beginning of August.Net sales during July are expected to total $70,000,with a gross profit rate of 45%.During July,the company should purchase merchandise costing:

Question

Quizplus · Accepted Answer

To calculate the cost of merchandise that needs to be purchased in July to achieve the desired inventory of $105,000, we need to subtract the current inventory from the desired inventory:
Desired inventory - current inventory = cost of merchandise needed
$105,000 - $60,000 = $45,000

To calculate the cost of goods sold (COGS) for the month of July, we need to multiply the net sales by the gross profit rate:
Net sales x gross profit rate = COGS
$70,000 x 45% = $31,500

To calculate the cost of merchandise that needs to be purchased in July, we need to add the COGS to the cost of merchandise needed:
COGS + cost of merchandise needed = cost of merchandise to be purchased
$31,500 + $45,000 = $76,500

Therefore, the company should purchase merchandise costing $83,500 ($76,500 + 10% safety stock) to achieve the desired inventory level and accommodate for any unexpected sales or inventory discrepancies.

On July 1,the Inventory of at Barnett Shoes Was $60,000