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Company A, a merchandising firm, has budgeted sales for the third quarter of the year: July: 80,000 August: 90,000 September:70,000 Cost of goods sold equals 65% of sales
Company A, a merchandising firm, has budgeted sales for the third quarter of the year:
July: 80,000
August: 90,000
September:70,000
Cost of goods sold equals 65% of sales. The company wants to maintain a monthly ending inventory equal to 130% of the cost of goods sold for the following month. The inventory on June 30th is less than this ideal since it is only 65,000. The company is now preparing a merchandise budget.
Calculate the following:
What are the budgeted purchases for July?
What is the desired inventory for September?
Expert Solution
Month June July Aug Sept
Sales 80000 90000 70000
COGS 52000 58500 45500 (65% of Sales)
Desired Inventory 67600 76050 59150 (130% of following months COGS)
Budgeted purchase for July = Desired inventory at the end of July + (desired inventory at the beginning of July - actual Inventory at the beginning of month)
=76050+67600-65000=78650
Desired inventory at the beginning of Sept = 59150
Desired inventory at the end of Sept will depend upon the sales for the month of October.
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