Sales of $250,000 are forecast for the third quarter. Gross profit is 60% of sales, and beginning inventory is $165,000. If ending inventory is budgeted as $183,000, what are the budgeted purchases?
A) $118,000
B) $132,000
C) $168,000
D) $82,000

Question

Quizplus · Accepted Answer

To calculate budgeted purchases, first determine the cost of goods sold (COGS). With a gross profit of 60% on sales of $250,000, COGS is 40% of sales (100% - 60% = 40%). COGS = 40% of $250,000 = $100,000. Next, use the formula: Budgeted Purchases = COGS + Ending Inventory - Beginning Inventory. Plugging in the numbers: Budgeted Purchases = $100,000 + $183,000 - $165,000 = $118,000.

Sales of $250,000 Are Forecast for the Third Quarter