Question

STU Company provided the following information related to its inventory sales and purchases for December Year 1 and the first quarter of Year 2:

Col1 Dec. Year 1 Jan. Year 2 Feb. Year 2 Mar. Year 2 (Actual) (Budgeted) (Budgeted) (Budgeted)

Col2 Cost of goods sold $ 36,000 $ 66,000 $ 86,000 $ 56,000
Desired ending inventory levels are 28% of the following month's projected cost of goods sold. Budgeted purchases of inventory in February Year 2 would be:_________-

Answer 1

$77,600

Step-by-step explanation:

February

Total Needs:

= Budgeted Cost of Goods Sold + Desired Ending Inventory

= $ 86,000 + (28% of March cost of goods sold)

= $86,000 + (0.28 × $56,000)

= $86,000 + $15,680

= $101,680

Budgeted purchases of inventory in February Year 2:

= Total Needs - Beginning Inventory

= $101,680 - (28% of February cost of goods sold)

= $101,680 - (0.28 × $86,000)

= $101,680 - $24,080

= $77,600