Question

​Tuscarora, Inc., a merchandising​ company, has the following budgeted​ figures: Jan Feb Mar April Sales $ 56 comma 600 $ 61 comma 000 $ 81 comma 000 $ 93 comma 000 Cost of goods sold 60​% of sales Required ending inventory $ 15 comma 000 ​+ 20​% of next​ month's sales Inventory on hand on Jan 1 $ 27 comma 000 Calculate the budgeted purchases for the month of January. A. $ 27 comma 200 B. $ 6 comma 760 C. $ 61 comma 160 D. $ 34 comma 160

Answer 1

D. $34,160 is the budgeted purchases for the month of January.

Step-by-step explanation:

a) Budgeted purchases is equal to cost of goods sold plus closing inventory minus opening inventory, i.e. $33,960 + $27,200 - $27,000 = $34,160.

b) Cost of goods sold equals 60% of Sales ($56,600) = $33,960.

c) Closing inventory equal $15,000 + 20% of February Sales ($61,000) = $27,200.

So, to get purchases, we work back from cost of sales and add the closing inventory, which gives the cost of goods available for sale, then we deduct the opening inventory ($27,000, which is given).

Answer 2

D. $ 34 comma 160

Step-by-step explanation:

The movement in the balance of inventory at the start and end of a period is as a result of sales and purchases. While sales reduces the balance in inventory, purchases increases the balance. This may be expressed mathematically as

Opening balance + purchases - cost of goods sold = closing balance

Given that Cost of goods sold 60​% of sales and Required ending inventory $ 15 comma 000 ​+ 20​% of next​ month's sales , then

Cost of goods sold for January = 60% * $ 56,600

= $33,960

Required ending inventory for January = $15,000 + 20% * $61,000

= $15,000 + $12,200

= $27,200

$27,000 + budgeted purchases - $33,960 = $27,200

Budgeted purchases for January = $33,960 + $27,200 - $27,000

= $34,160