Question

Bramble Corporation is a small wholesaler of gourmet food products. Data regarding the store's  operations follow:

• Sales are budgeted at $210,000 for November, $190,000 for December, and $180,000 for January.
• Collections are expected to be 50% in the month of sale and 50% in the month following the sale.
• The cost of goods sold is 55% of sales.
• The company would like maintain ending merchandise inventories equal to 45% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase.
• Other monthly expenses to be paid in cash are $22,700.
• Monthly depreciation is $13,700.
• Ignore taxes.

Balance Sheet October 31
Assets
Cash	$	22,500
Accounts receivable		72,500
Merchandise inventory		51,975
Property, plant and equipment, net of $574,500 accumulated depreciation		1,096,500
Total assets	$	1,243,475
Liabilities and Stockholders' Equity
Accounts payable	$	256,500
Common stock		822,500
Retained earnings		164,475
Total liabilities and stockholders' equity	$	1,243,475

Required:

Prepare the direct material budget for December merchandise purchases:

Please show process.

Answer 1

Budgeted purchase for December = $102,025

Working

Purchases Budget
	November	December	January
Cost of goods sold	$        115,500	$        104,500	$             99,000
Plus: Desired ending inventory	$          47,025	$          44,550*	$                       -
Total Inventory required	$        162,525	$        149,050
Less: Beginning inventory	$          51,975	$          47,025
Purchases	$        110,550	$        102,025

*99000 x 45%

	November	December	January
Sales	$ 210,000.00	$ 190,000.00	$     180,000.00
Cost of goods sold (55% of above)	$ 115,500.00	$ 104,500.00	$       99,000.00