Question

A department store has budgeted cost of goods sold for August of $60,000 for its women's coats. Management wants to have $12,000 of coats in inventory at the end of the month to prepare for the winter season. Beginning inventory in August was $8,000. What dollar amount of coats should be purchased to meet the above plans?

Answer 1

$64,000 worth of coats should be purchased

Step-by-step explanation:

First of all, let us lay out the information stated in the question

Budgeted cost of goods sold = $60,000

Ending inventory = $12,000

Beginning inventory = $8,000

Next, we have to calculate the total cost of inventory transaction within the period, and this includes both the budgeted cost of goods sold and the ending inventory.

Total inventory = cost of goods sold + ending inventory

= 60,000 + 12,000 = $72,000

Finally, we have to put the beginning inventory into consideration, because, out of the total inventory needed, there is an inventory worth $8,000 in stock, hence the amount to be purchased will reduce by $8,000.

Therefore:

Dollar amount of coat to be purchased = 72,000 - 8,000 = $64,000