Question

Outdoor Company expects to sell 6500 units for $ 155 each for a total of $ 1,007,500 in January and 3 comma 200 units for $ 225 each for a total of $ 720,000 in February. The company expects cost of goods sold to average 50% of sales revenue, and the company expects to sell 4400 units in March for $ 270 each. Outdoor's target ending inventory is $ 11000 plus 40% of the next month's cost of goods sold. Prepare Outdoor's inventory, purchases, and cost of goods sold budget for January and February.

Outdoor Company Inventory, Purchases, and Cost of Goods Sold Budget Two months Ended January 31 and February 28 January February Cost of goods sold Plus: Desired ending merchandise inventory Total merchandise inventory required Less: Beginning merchandise inventory Budgeted purchases

Answer 1

OUTDOOR COMPANY
Inventory, Purchases, and Cost of goods sold Budget
Two months ended January 31 and February 28
	January	February
Cost of goods sold	$ 503,750.00	$ 360,000.00
Plus: Desired ending merchandise inventory	$ 155,000.00	$ 248,600.00
Total merchandise inventory required	$ 658,750.00	$ 608,600.00
Less: Beginning merchandise inventory	$ 212,500.00	$ 155,000.00
Budgeted purchases	$ 446,250.00	$ 453,600.00

Working note

Plus: Desired ending merchandise inventory	=+(360000*40%)+11000	=+(((4400*270)/2)*40%)+11000
Less: Beginning merchandise inventory	=+(503750*40%)+11000	=155000

Beginning inventory of January will be desired ending inventory of December which is 40% of COGS of january plus $11000.