Question

Sander Enterprises prepared the following sales​ budget:

Month	Budgeted Sales
March	$9,000
April	$14,000
May	$15,000
June	$10,000

The expected gross profit rate is 30​% and the inventory at the end of February was $10,000. Desired inventory levels at the end of the month are 30​% of the next​ month's cost of goods sold.

What are the total purchases budgeted for​ May?

A.$9,450

B.$10,500

C.$11,550

D. $ 13650

Answer 1

Answer:
Particulars	March	April	May	June
Sales	$ 9,000	$ 14,000	$ 15,000	$ 10,000
Cost of goods sold - 70%	$ 6,300	$ 9,800	$ 10,500	$ 7,000
Less: Beginning inventory	$10,000	$ 2,940	$ 3,150	$ 2,100
Add: Ending inventory (30% of next month COGS)	$ 2,940 ($9,800 x 30%)	$ 3,150 ($ 10,500 x 30%)	$ 2,100 ($7,000 x 30%)
Purchase		$ 10,010	$ 9,450
Total purchases budgeted for​ May = $ 9,450
Option (A) is Correct - $ 9,450