Question

The Waller Merchandise Company (a retailer) has budgeted $100,000 in sales for the month of December....

The Waller Merchandise Company (a retailer) has budgeted $100,000 in sales for the month of December. The company's gross margin % is 43%. The company wants to increase inventory by $9,500 during the month.

Compute Waller's budgeted purchases for December.

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Answer #1

Solution:

Given data :

Budgeted Sales = $1,00,000

Gross Margin = 43%

Computation of Gross Profit -

Gross Profit = Sales * GP %

= $1,00,000 * 43%

= $43,000

Let us Assume -

Opening Stock = $X

Hence closing stock = $X+$9,500

Cost of goods sold = Sales - Gross profit

= $(1,00,000 - 43,000)

= $57,000

Cost Of Goods Sold is also = Opening stock + Purchases - Closing Stock

   $57,000 = $X + Purchases - ($X+$9,500)

$57,000 = $x + purchases - $X - $9,500

    $ 57,000 + $ 9,500 = Purchases

$66,500 = Purchases

Therefore Budgeted Purchases for December = $66,500 .

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