Question

Jasper Fruits Corporation wholesales peaches and oranges. Barbara Jasper is working with the company’s accountant to prepare next year’s budget. Ms. Jasper estimates that sales will increase 5 percent for peaches and 10 percent for oranges. The current year’s sales revenue data follow.

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
Peaches	$	221,000		$	241,000		$	301,000		$	241,000		$	1,004,000
Oranges		406,000			456,000			576,000			386,000			1,824,000
Total	$	627,000		$	697,000		$	877,000		$	627,000		$	2,828,000

Based on the company’s past experience, cost of goods sold is usually 65 percent of sales revenue. Company policy is to keep 20 percent of the next period’s estimated cost of goods sold as the current period’s ending inventory. (Hint: Use the cost of goods sold for the first quarter to determine the beginning inventory for the first quarter.)

Required

1. Ms. Jasper estimates next year’s ending inventory will be $34,600 for peaches and $56,100 for oranges. Prepare the company’s inventory purchases budgets for the next year, showing quarterly figures by product.

Answer 1

Solution:

Inventory Purchase Budget for next year - Jasper fruit corporation
Particulars	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Total
Peaches:
Budgeted sales	$232,050.00	$253,050.00	$316,050.00	$253,050.00	$1,054,200.00
Budgeted COGS (65% of sales)	$150,832.50	$164,482.50	$205,432.50	$164,482.50	$685,230.00
Add: Desired Ending inventory (20% of next quarter COGS)	$32,896.50	$41,086.50	$32,896.50	$34,600.00	$34,600.00
Cost of goods available for sales	$183,729.00	$205,569.00	$238,329.00	$199,082.50	$719,830.00
Less: Beginning inventory	$30,166.50	$32,896.50	$41,086.50	$32,896.50	$30,166.50
Budgeted Purchases	$153,562.50	$172,672.50	$197,242.50	$166,186.00	$689,663.50
Oranges:
Budgeted sales	$446,600.00	$501,600.00	$633,600.00	$424,600.00	$2,006,400.00
Budgeted COGS (65% of sales)	$290,290.00	$326,040.00	$411,840.00	$275,990.00	$1,304,160.00
Add: Desired Ending inventory (20% of next quarter COGS)	$65,208.00	$82,368.00	$55,198.00	$56,100.00	$56,100.00
Cost of goods available for sales	$355,498.00	$408,408.00	$467,038.00	$332,090.00	$1,360,260.00
Less: Beginning inventory	$58,058.00	$65,208.00	$82,368.00	$55,198.00	$58,058.00
Budgeted Purchases	$297,440.00	$343,200.00	$384,670.00	$276,892.00	$1,302,202.00
Total Budgeted Purchases	$451,002.50	$515,872.50	$581,912.50	$443,078.00	$1,991,865.50