Question

The Willsey Merchandise Company has budgeted $40,000 in sales for the month of December. The

company's cost of goods sold is 30% of sales. If the company has budgeted to purchase $18,000 in
merchandise during December, then the budgeted change in inventory levels over the month of December
is:
A. $6,000 increase
B. $10,000 decrease
C. $22,000 decrease
D. $15,000 increase

Answer 1

The budgeted change in inventory levels for the Willsey Merchandise Company in December is a $6,000 increase, calculated by taking the budgeted merchandise purchases of $18,000 and subtracting the cost of goods sold, which is $12,000 (30% of the $40,000 in sales).

Step-by-step explanation:

The Willsey Merchandise Company has budgeted $40,000 in sales for the month of December, with the cost of goods sold being 30% of sales. Therefore, the cost of goods sold equals $40,000 * 30% = $12,000. Since the company has budgeted to purchase $18,000 in merchandise during December, the budgeted change in inventory levels would be the budgeted merchandise purchases minus the cost of goods sold. This can be calculated as $18,000 (budgeted purchases) - $12,000 (cost of goods sold) = $6,000. Hence, the budgeted change in inventory levels is a $6,000 increase.