Question

Bracken Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow:

o Sales are budgeted at $462,000 for November, $348,000 for December, and $380,000 for January.
o Collections are expected to be 80% in the month of sale, 17% in the month following the sale, and 3% uncollectible.
o The cost of goods sold is 85% of sales.
o The company would like to maintain ending merchandise inventories equal to 70% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase.
o Other monthly expenses to be paid in cash are $26,550.
o Monthly depreciation is $20,400.
o Ignore taxes.

Balance Sheet October 31
Assets
Cash	$29,000
Accounts receivable, net of allowance for uncollectible accounts	82,400
Merchandise inventory	217,500
Property, plant and equipment, net of $656,000 accumulated depreciation	1,312,000
Total assets	1,640,900
Liabilities and Stockholders' Equity
Accounts payable	$300,000
Common stock	840,000
Retained earnings	500,900
Total liabilities and stockholders' equity	$1,640,900

The cost of December merchandise purchases would be:

a.$295,800

b. $226,100

c. $392,700

d. $314,840