Alpha Beta Company has a sales budget for next month of $50,000. Cost of goods sold is expected to be 60 percent of sales. All goods are purchased in the month used and paid for in the month following their purchase. The beginning inventory of merchandise is $1,500 and an ending inventory of $2,000 is desired. Beginning accounts payable is $13,000.
How much merchandise inventory will Alpha Beta Company need to purchase next month?
A)$29,000
B)$29,500
C)$30,000
D)$30,500

Question

Quizplus · Accepted Answer

To calculate the merchandise inventory Alpha Beta Company needs to purchase next month, first determine the cost of goods sold (COGS) which is 60% of sales, so $50,000 * 60% = $30,000. Then, adjust for the desired ending inventory increase by adding the difference between the ending and beginning inventory ($2,000 - $1,500 = $500). Therefore, the total needed is $30,000 (COGS) + $500 (inventory adjustment) = $30,500.

Alpha Beta Company Has a Sales Budget for Next Month