Question

Tremont, Inc. sells tire rims. Its sales budget for the nine months ended September 30, 2018​, and additional information​ follow:

Quarter Ended

Nine-Month

March 31                                 June 30                  September 30                            Total

Cash sales, 20%                              $20,000                                    $30,000                                $25,000                                     $75,000

Credit sales, 80%                            80,000                                     120,000                                   100,000                                300,000

Total sales                                                 $100,000                             $150,000                                   $125,000                               $375,000

Prepare an​ inventory, purchases, and cost of goods sold budget for each of the first three quarters of the year. Compute cost of goods sold for the entire​ nine-month period.

In the​ past, cost of goods sold has been​ 40% of total sales. The director of marketing and the financial vice president agree that each​ quarter's ending inventory should not be below $9,000 plus​ 10% of cost of goods sold for the following quarter. The marketing director expects sales of $200,000 during the fourth quarter. The January 1 inventory was $16,000.

Answer 1

Tremont, Inc. Cost of Goods Sold Budget For Nine Months Ended September 30 Mar. 31 Jun. 30 Sep. 30 Nine Month Total sales $100,000 $150,000 $125,000 $375,000 Cost of Goods Sold % 40% 40% 40% 40% Cost of Goods Sold, dollars $40,000 $60,000 $50,000 $150,000 Dec. 31 $200,000 --> (a) 40% --> (b) $80,000 --> (a) x (b) Tremont, Inc. Purchases Budget For Nine Months Ended September 30 Mar. 31 Jun. 30 Sep. 30 Nine Month Dec. 31 Cost of Goods Sold, dollars $40,000 $60,000 $50,000 $150,000 $80,000 [As calculated in Part-1] Add: Ending Inventory $15,000 $14,000 $17,000 $17,000 [Ref: NOTE] Total Goods Needed $55,000 $74,000 $67,000 $167,000 Less: Beginning Inventory $16,000 $15,000 $14,000 $16,000 = Respective previous quarter's ending invetory calculated Inventory Purchases $39,000 $59,000 $53,000 $151,000 NOTE: Ending Inventory for Mar. 31 = $9,000 + ($60000 x 10%) = $15000; Jun. 30 = $9,000 + ($50000 x 10%) = $14000; Sep. 30 = $9,000 + ($80000 x 10%) = $17000.