Question

Bramble Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow:

Sales are budgeted at $280,000 for November, $260,000 for December, and $250,000 for January.
Collections are expected to be 45% in the month of sale and 55% in the month following the sale.
The cost of goods sold is 80% of sales.
The company would like to maintain ending merchandise inventories equal to 70% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $23,400.
Monthly depreciation is $14,400.
Ignore taxes.
Balance Sheet
October 31
Assets
Cash $ 21,800
Accounts receivable 71,800
Merchandise inventory 156,800
Property, plant and equipment, net of $573,800 accumulated depreciation 1,095,800
Total assets $ 1,346,200
Liabilities and Stockholders' Equity
Accounts payable $ 255,800
Common stock 821,800
Retained earnings 268,600
Total liabilities and stockholders' equity $ 1,346,200
The cost of December merchandise purchases would be:

Answer 1

$202,400

Step-by-step explanation:

Calculation for what The cost of December merchandise purchases would be:

December merchandise purchases:

November December January

Sales $280,000 $260,000 $250,000

Cost of goods sold (80% of sales)

$224,000 $208,000 $200,000

(80%*$280,000=$224,000)

(80%*$260,000=$208,000)

(80%*$250,000=$200,000)

Add desired ending merchandise inventory(70% of next month's COGS) $145,600 $140,000

(70%*$208,000=$145,600)

(70%*$200,000=$140,000)

Total needs $369,600 $348,000

($224,000+$145,600=$359,600)

($208,000+$140,000=$348,000)

Less beginning merchandise inventory(70% of this month's COGS)

$156,800 $145,600

(70%*$224,000=$156,800)

(70%*$208,000=$145,600)

Required purchases$212,800 $202,400

($369,600-$156,800=$212,800)

($348,000-$145,600=$202,400)

Therefore The cost of December merchandise purchases would be:$202,400