Taurus Company has the following data: $\begin{array}{lr}
\text { Month } & \text { Budgeted Sales } \
\hline \text { January } & \$ 108,000 \
\text { February } & 132,000 \
\text { March } & 144,000 \
\text { April } & 120,000
\end{array}$ The gross profit rate is 40% and the inventory at the end of December was $19,000.Desired inventory levels are 30% of next month's sales at cost._____ is the expected total purchases budgeted for February.
A)$105,120
B)$79,200
C)$81,360
D)None of these answers is correct

Question

Quizplus · Accepted Answer

To calculate the expected total purchases for February, first determine the desired ending inventory for February, which is 30% of March's sales at cost: 0.3 * $144,000 * (1 - 0.4) = $25,920. The beginning inventory for February is 30% of February's sales at cost: 0.3 * $132,000 * (1 - 0.4) = $23,760. The cost of goods sold for February is 60% of February's sales: 0.6 * $132,000 = $79,200. Therefore, purchases = COGS + Ending Inventory - Beginning Inventory = $79,200 + $25,920 - $23,760 = $81,360.

Taurus Company Has the Following Data The Gross Profit Rate Is 40% and the Inventory at