Question

The following information pertains to the January operating budget for Casey Corporation. Budgeted sales for January $205,000 and February $104,000. Collections for sales are 40% in the month of sale and 60% the next month. Gross margin is 25% of sales. Administrative costs are $14,000 each month. Beginning accounts receivable is $29,000. Beginning inventory is $18,000. Beginning accounts payable is $68,000. (All from inventory purchases.) Purchases are paid in full the following month. Desired ending inventory is 30% of next month's cost of goods sold (COGS). . o o o At the end of January, budgeted ending inventory is $41,400 $31,200 $23,400 $7800

Answer 1

Answer

• Budgeted ending inventory of January = 30% of February’s Cost of Goods Sold.
• Gross margin = 25% of sales, hence, Cost of Goods Sold = 75% of sales.
• Cost of Goods Sold for February = $ 104000 feb sale x 75% = $ 78000
• Budgeted ending inventory = 30% of $ 78000
  = 30% x 78000
  = $ 23,400 [Answer]
• Correct Answer = Option #3: $ 23,400