Question

ABC company has budgeted the following sales: Jan: $100,000 Feb: $200,000 March: $250,000 COGS is 60%...

ABC company has budgeted the following sales:

Jan: $100,000

Feb: $200,000

March: $250,000

COGS is 60% of sales and the unit cost is $6.

The selling price is $10 per unit

In addition to having enough units to meet monthly sales, ABC would like ending inventory to be equal to 10% of the following months sales.

Inventory at Dec 31 $6,000 at a cost of $6 per unit

1. How much inventory in units should ABC buy in January?

a. 10,000 units

b. 12,000 units

c. 11,000 units

2. How much inventory in dollars should ABC buy in Jan?

a. $100,000

b. 130,000

c. 78,000

Business   Accounting   
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Homework Answers

Answer #1
Particulars Jan Feb
Budgeted sales in $ 100000 200000
Selling Price in $ 10 10
Units sold 10000 20000
Ending Inventory (20000*10%) 2000
Less: Opening Stock ($6000/6) 1000
Inventory shoukd Buy ( in Units) 11000
Inventory shoukd Buy ( in $) (11000*6) 66000

1. Inventory Should ABC Buy in January In Units is 11,000 units

2. Inventory Should ABC Buy in January In $ is $66,000/- (11,000*6).

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