Question

Sander Enterprises prepared the following sales​ budget: Month Budgeted Sales March \$9,000 April \$14,000 May \$15,000...

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