Question

Sander Enterprises prepared the following sales budget: Month March April Budgeted Sales $3,000 $10,000 $13,000 $17.000 May June The expected gross profit rate is 30% and the inventory at the end of February was $9.000. Desired inventory levels at the end of the month are 30% of the next month's cost of goods sold. What are the total purchases budgeted for May? OA. $11,830 OB. $8,260 OC. $9,100 OD. $9,940

Answer 1

Option D is correct i.e. $9,940

Explanation :-

Budgeted sales in may	$13,000
Less: gross profit @30%	($3,900)
Cost of goods required for sales	$9,100
Add:- Ending inventory	$3,570
Less :- Opening inventory (9,100 x 30%)	($2,730)
Budgeted purchase for May	$9,940

Ending inventory = June's COGS x 30%

= [17,000 - (17,000 x 30%)] x 30%

= $3,570