Question

Cost of goods sold is budgeted at 40% of sales, and the inventory at the end of February was $34,000. Desired inventory levels at the end of each month are 10% of the next month's cost of goods sold. What is the desired beginning inventory on June 1

Answer 1

$9,920

Step-by-step explanation:

The computation of the desired beginning inventory as on June 1 is shown below:

Inventory as on June 1 = Given percentage of the cost of goods sold in the month of June

= 10% × (40% × $248,000)

= 0.10 × $99,200

= $9,920

As the cost of goods sold is 40% of sales so we considered this thing and according to it we find out the beginning inventory