Question

Moore Wholesalers is preparing its merchandise purchases budget. Budgeted sales are $430,000 for April and $500,000 for May. Cost of goods sold is expected to be 62% of sales. The company's desired ending inventory is 23% of the following month's cost of goods sold. Compute the required purchases for April. Moore Wholesalers Purchases Budget

Answer 1

Moore Wholesalers
Purchase Budget
April
Cost of goods sold	266,600
Add: Ending inventory	71,300
Total Inventory needed	337,900
Less: Beginning inventory	-61,318
Purchases	$276,582

Cost of goods sold for April = 62% of sales

= 430,000 x 62%

= $266,600

Cost of goods sold for May = 62% of sales

= 500,000 x 62%

= $310,000

Ending inventory for April = 23% of cost of goods sold for May

= 310,000 x 23%

= $71,300

Ending inventory for month of March = 23% of cost of goods sold of April

= 266,600 x 23%

= $61,318

Ending inventory of March is the beginning inventory of April.

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