The Murcer Company has budgeted the following activity for October:
Sales of $300,000 all in cash
Inventory of finished goods at September 30^th is $120,000
The cost of goods sold is 60% of the selling price
Planned merchandise inventory at October 31^st is $100,000
All purchases were paid for in cash
Budgeted inventory purchases for October are:

Question

Quizplus · Accepted Answer

The cost of goods sold is 60% of $300,000, which is $180,000. To find the purchases, use the formula: Ending Inventory = Beginning Inventory + Purchases - Cost of Goods Sold. Solving for Purchases gives: $100,000 = $120,000 + Purchases - $180,000, so Purchases = $160,000.

The Murcer Company Has Budgeted the Following Activity for October