Question

*Do It! Review 21-5

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Zeller Company estimates that 2017 sales will be $43,200 in quarter 1, $51,300 in quarter 2, and $63,000 in quarter 3. Cost of goods sold is 50% of sales. Management desires to have ending finished goods inventory equal to 12% of the next quarter’s expected cost of goods sold.

Prepare a merchandise purchases budget by quarter for the first 6 months of 2017.

ZELLER COMPANY
Merchandise Purchases Budget

[Entry field with correct answer] For the Six Months Ending June 30, 2017

Quarter

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2

Six Months

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[Entry field with correct answer] Desired Ending Merchandise Inventory

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[Entry field with correct answer] Total Required Units

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[Entry field with correct answer] Required Merchandise Purchases

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Question Attempts: 1 of 3 used

Answer 1

Merchandise Purchase Budget:

	Quarter 1	Quarter2	6 Months
Cost of Goods Sold (50% of Sales)	21,600	25,650	47,250
Add: Desired Ending Merchandise Inventory = 12% of next quarter COGS	3,078 (25,650*12%)	3,780 (63,000*50%*12% )	6,858
Total Required Units	24,678	29,430	54,108
Less: Opening Stock	-	3,078	3,078
Required Merchandise Purchases	24,678	26,352	51,030

Note: Closing stock of one quarter becomes opening stock of next quarter.