Question

Memphis Company's May sales budget... Memphis Company's May sales budget calls for sales of $890,000. The store expects to begin May with $49,000 of inventory and to end the month with $54,000 of inventory. Gross margin is typically 35% of sales. Compute the budgeted cost of merchandise purchases for May.

Answer 1

The correct answer is $583,500.

Step-by-step explanation:

According to the scenario, the computation of the given data are as follows:

Sales = $890,000

Gross margin = $890,000 × 35% = $311,500

So, Cost of goods sold = Sales - Gross margin

= $890,000 - $311,500

= $578,500

So, now we can calculate the cost for merchandise purchase by using following formula:

Cost of purchase = Cost of goods sold + Ending inventory - Beginning inventory

= $578,500 + $54,000 - $49,000

= $583,500.