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: | ||||
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 |
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