Question

Wallace Company provides the following data for next year: Month Budgeted Sales January $120,000 February 108,000 March 132,000 April 144,000 The gross profit rate is 40% of sales. Inventory at the end of December is $21,600 and target ending inventory levels are 30% of next month's sales, stated at cost. Purchases budgeted for January total:

Answer 1

The accounting profit of the firm is $50,000.

Step-by-step explanation:

The accounting profit of a firm is calculated by subtracting the explicit costs from the total revenues.

In this case, the firm had sales revenue of $1 million, labor cost of $600,000, capital cost of $150,000, and material cost of $200,000.

Therefore, the accounting profit can be calculated as follows:

Accounting profit = Total revenues - Explicit costs = $1,000,000 - ($600,000 + $150,000 + $200,000) = $50,000.

Answer 2

$69,840

Step-by-step explanation:

Data provided;

Month Budgeted Sales

January $120,000

February $108,000

March $132,000

April $144,000

Gross profit rate is 40% of sales it means cost of goods sold is 60% of sales

Target ending inventory levels = 30% = 0.3

Therefore,

Purchases budgeted for January total

= ( $120,000 × 0.6 ) + ( $108,000 × 0.6 × 0.3 ) - $21,600

= $72,000 + $19,440 - $21,600

= $69,840