Question

Chu Company provided the following information related to its inventory sales and purchases for December Year...

Chu Company provided the following information related to its inventory sales and purchases for December Year 1 and the first quarter of Year 2:

Dec. Year 1 Jan. Year 2 Feb. Year 2 Mar. Year 2
(Actual) (Budgeted) (Budgeted) (Budgeted)
Cost of goods sold $ 39,000 $ 69,000 $ 89,000 $ 59,000


Desired ending inventory levels are 25% of the following month's projected cost of goods sold. Budgeted purchases of inventory in February Year 2 would be:

$89,000.

$81,500.

$66,500.

$111,000.

Homework Answers

Answer #1

Correct answer------------$81,500

Working

Merchandise Purchases Budget
November January February March
Cost of goods sold $      69,000.00 $     89,000.00 $            59,000.00
Add: Desired ending Inventory $      22,250.00 $     14,750.00*
Total merchandise required $      91,250.00 $   103,750.00
Less: Beginning Inventory $      17,250.00 $     22,250.00
Merchandise to be purchased $      74,000.00 $     81,500.00

*59000 x 25%

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