Question

The shoe department of Nilly's Department Store has prepared a sales budget for April calling for a sales volume of $75,000. The department expects to begin in April with a $50,000 inventory and to end the month with an $42,500 inventory. Its cost of goods sold averages 70% of sales. Prepare a purchases budget to calculate the amount of goods that need to be purchased during April. What is the amount of goods to be purchased?

A) 95,000

B) 45,000

C) 75,000

Answer 1

Purchase Budget
Budgeted Sales	75,000
Cost of goods sold%	70%
Purchases required for Sales	52,500
Add: Ending Inventory	42,500
Total Required	95,000
Less: Beginning Inventory	50,000
Required Purchases	45,000
Hence, the answer is B