Question

Hardy Company's cost of goods sold is consistently 60% of sales. The company plans ending merchandise Inventory for each month equal to 30% of the next month's budgeted cost of goods sold. All merchandise is purchased on credit, and 50% of the purchases made during a month is paid for in that month. Another 35% is paid for during the first month after purchase, and the remaining 15% pald for during the second month after purchase. Expected sales are: August (actual). $365,000, September (actual). $370,000 October (estimated). $280,000, and November (estimated). $340,000. Use this information to determine October's expected cash payments for purchases. Calculate Monthly Purchase August September Budgeted ending inventory Required available inventory Required purchases Calculate Payments Made for Inventory: - Purchases August Purchases paid in September October After October August purchases September purchases October purchases Determine October's Expected Cash Payments for Purchases. October's expected cash payments for purchases

Answer 1

CALCULATE MONTHLY PURCHASE :

	August	september	october	november
Budgeted ending inventory	66,600	50,400	61,200
Cost of goods sold	219000	222000	168000	204000
Required available inventory	285600	272400	229200
Less: Budgeted beginning inventory	65700	66600	50400
Required purchase	219900	205800	178800

CALCULATE PAYMENTS MADE FOR INVENTORY :

	Purchases	august	september	october	after october
august purchases	219900	109950	76965	32985
september purchases	205800		102900	72030	30870
october purchases	178800			89400	89400
TOTAL				194415

october = 194415