Audrey Company has the following data:
$\begin{array}{ll}\text { Month }&\text { Budgeted Sales }\
\text { May } & \$ 46,000 \
\text { June } & 50,000 \
\text { July } & 52,000 \
\text { August } & 48,000
\end{array}$
The cost of goods sold percentage is 65% of sales and the desired ending inventory is 25% of next month's sales at cost.What are the total purchases budgeted for July?
A) $33,150
B) $33,800
C) $41,600
D) $42,250

Question

Quizplus · Accepted Answer

The correct answer is A.The total purchases budgeted for July can be calculated as follows:Budgeted sales for July = $52,000Cost of goods sold percentage = 65%Cost of goods sold for July = $52,000 x 65% = $33,800Desired ending inventory at cost = 25% of August's sales at costAugust's sales at cost = $48,000 x 65% = $31,200Desired ending inventory at cost = $31,200 x 25% = $7,800Total purchases budgeted for July = Cost of goods sold for July + Desired ending inventory at costTotal purchases budgeted for July = $33,800 + $7,800 = $41,600

Audrey Company Has the Following Data The Cost of Goods Sold Percentage Is 65% of Sales