Question

Coomb’s Fashions forecasts sales of $141,000 for the quarter ended December 31. Its gross profit rate is 20% of sales, and its September 30 inventory is $40,500. If the December 31 inventory is targeted at $49,500, budgeted purchases for this quarter should be:

Answer 1

See below

Step-by-step explanation:

Given that;

September 30 inventory = $40,500

December 31 inventory = $49,500

Let x be the budgeted purchases for this quarter.

We can now calculate the budgeted purchases for this quarter by using the formula below;

Required December 31 inventory = September 30 inventory + x - Cost of goods sold

Where cost of goods sold = $141,000 × 0.8

So, by putting the values, we'll have

$49,500 = $40,500 + x - $141,000 × 0.8

$49,500 = $40,500 + x - $112,800

x = $49,500 - $40,500 - $112,800

x = $121,800

Therefore, budgeted purchases for the next quarter should be $121,800