In September 2016, the management of Rye Company assembles the
following data in preparation of budgeted merchandise purchases for
the months of October and November.
| 1. | Expected Sales | ||||||
| October | $1,500,000 | ||||||
| November | 2,100,000 | ||||||
| December | 2,700,000 | ||||||
| 2. | Cost of goods sold is expected to be 70% of sales. | ||||||
| 3. | Desired ending merchandise inventory is 20% of the next month's cost of goods sold. | ||||||
| 4. | The beginning inventory at October 1 will be the desired amount. | ||||||
Compute the budgeted merchandise purchases for October and
November.
Homework Answers
Solution:
| RYE Company | ||
| Merchandise Purchases Budget | ||
| Particulars | October | November |
| Cost of Goods Sold (70% of sales) | $10,50,000 | $14,70,000 |
| Add: Desired ending inventory (20% of next month's Cost of goods sold) | $2,94,000 | $3,78,000 |
| Total goods required for Production | $13,44,000 | $18,48,000 |
| Less: Opening Inventory | $2,10,000 | $2,94,000 |
| Budgeted Merchandise Purchase | $11,34,000 | $15,54,000 |
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Accounts receivable
134,000
Inventory
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Buildings and equipment, net of depreciation
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