Question

Durango Co. desires to maintain an ending inventory equal to 10% of next month's cost of budgeted sales. Assume that Durango Co. maintained this level of ending inventory for the month of September. The cost of budgeted sales for October is $100,000 and the cost of budgeted sales for November is $200,000. Calculate required purchases for the month of October.

Answer 1

Required purchase for October = $110,000

Step-by-step explanation:

Given:

Ending inventory = 10% of next month's budgeted sales

Budgeted sales for October = $100,000

Budgeted sales for November = $200,000

Purchase for the month of October = ?

Calculation of Required purchase for the month of October :

Particular Amount

Budgeted sales of October $100,000

Add: Desired ending inventory($200,000 x 10%) $20,000

Total Inventory needed $120,000

Less: Beginning inventory($100,000 x 10%) $10,000

Required purchase for October $110,000