JT Department Store expects to generate the following sales for the next three months: JT's cost of gods sold is 60% of sales dollars.At the end of each month,JT wants a merchandise inventory balance equal to 20% of the following month's expected cost of goods sold.What dollar amount of merchandise inventory should JT plan to purchase in August?
A)$257,400
B)$314,600
C)$352,800
D)$327,800

Question

JT Department Store expects to generate the following sales for the next three months:  JT's cost of gods sold is 60% of sales dollars.At the end of each month,JT wants a merchandise inventory balance equal to 20% of the following month's expected cost of goods sold.What dollar amount of merchandise inventory should JT plan to purchase in August?
A)$257,400 
B)$314,600 
C)$352,800 
D)$327,800

Quizplus · Accepted Answer

To calculate the merchandise inventory balance that JT wants at the end of August, we need to first calculate the following month's expected cost of goods sold. We can do this by taking the expected sales for September and multiplying by the cost of goods sold percentage:

$570,000 x 60% = $342,000

JT wants their merchandise inventory balance at the end of August to be equal to 20% of September's expected cost of goods sold. We can calculate this by multiplying September's expected cost of goods sold by 20%:

$342,000 x 20% = $68,400

This means that JT needs to purchase enough merchandise inventory in August to have a balance of $68,400 at the end of the month. To do this, we need to add the expected cost of goods sold for August and September, and then multiply by 60% to get the cost of goods that JT needs to purchase. We can then add 20% of September's expected cost of goods sold to get the total amount of merchandise inventory that JT needs to purchase in August:

($510,000 + $570,000) x 60% + ($342,000 x 20%) = $352,800

Therefore, the dollar amount of merchandise inventory that JT should plan to purchase in August is $352,800.

JT Department Store Expects to Generate the Following Sales for the Next