Question

The budgeted sales for Jan, Feb and March are $40,000, $90,000 and $80,000 respectively. The inventory...

The budgeted sales for Jan, Feb and March are $40,000, $90,000 and $80,000 respectively. The inventory policy is to keep 80% COS of the following month plus 40% COS of the second following month.

What is budgeted purchase amount for January if   

the cost of sales (COS) is 75% and the beginning Inventory is $68,000?

Business   Accounting   
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Answer #1

--Budgeted purchase amount for January = $ 40,000

Sales for January $40,000
Cost of Goods Sold for January $30,000
Desired ending inventory for January $78,000
Less: Beginning inventory for January $68,000
Budgeted purchase amount for January $40,000

--Working

Sales for January 40000
Cost of Goods Sold for January =40000*75%
Desired ending inventory for January =+(90000*75%*80%)+(80000*75%*40%)
Less: Beginning inventory for January 68000
Budgeted purchase amount for January =+78000 - 68000
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