Question

Sander Enterprises prepared the following sales​ budget:

Month	Budgeted Sales
March	$5,000
April	$10,000
May	$15,000
June	$13,000

The expected gross profit rate is 10% and the inventory at the end of February was $11,000. Desired inventory levels at the end of the month are 20​% of the next​ month's cost of goods sold. What is the budgeted cost of goods sold for​ May?

Answer 1

The question has asked for Cost of Goods sold for the month of May:

Budgeted Sales for May = $15,000

Gross Profit margin = 10%

Thus Cost of Goods sold = $15,000 - 10% of $15,000

= $13,500

However if the question would have asked for goods Purchased in the month of May the answer would have been:

Cost of Goods Sold	$     13,500.00
Desired Closing Inventory (13000*90%*20%)	$        2,340.00
Less: Opening inventory (15000*90%*20%)	$     (2,700.00)
Goods Purchased in the month of May	$     13,140.00

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