Question

120 3O000 S0.000 Po 60 556 834 Arpated un-salesBEsales WACM In arrency Margsafin un. Kun Sal. pine 5 Mix 7 625 7 Mix NC 3 5% 2 25 331.25 300 30oun Poo 550 PROBLEM 4 (10 pints) The sales budget of Hickory Company for the third quarter of 2018 is as follows: July $96,000 Sales August $72,000 September $108,000 Sales are 20% cash, 80 % credit. Cost of goods sold is 70% of total sales. Desired ending inventory for each month is equal to 25% of cost of goods sold for the following month. Collections on credit sales are as follows: 50% in the month of sale 30% in the month following sale 15% in the second month following sale 5% uncollectible July 1 inventory is $16,000. Expected sales for October are $84,000 Payments for inventory are 70% in the month following purchase and 30 % two months following purchase. Prepare the purchases budget for July, August, and September

Answer 1

Solution

Purchases Budget
	July	August	September
Cost of goods sold	$          67,200	$          50,400	$             75,600
Plus: Desired ending inventory	$          12,600	$          18,900	$             14,700*
Total Inventory required	$          79,800	$          69,300	$             90,300
Less: Beginning inventory	$          16,000	$          12,600	$             18,900
Purchases	$          63,800	$          56,700	$             71,400

*58,800 x 25%

.Working

	July	August	September	October
Sales	$    96,000.00	$    72,000.00	$     108,000.00	$    84,000.00
Cost of goods sold (70% of above)	$    67,200.00	$    50,400.00	$       75,600.00	$    58,800.00