Hardy Company’s cost of goods sold is consistently 60% of sales. The company pla

Question

Hardy Company’s cost of goods sold is consistently 60% of sales. The company plans to carry ending merchandise inventory for each month equal to 20% of the next month’s budgeted cost of good sold. All merchandise is purchased on credit, and 50% of the purchases made during a month is paid for in that month. Another 35% is paid for during the first month after purchase, and the remaining 15% is paid for during the second month after purchase. Expected sales are: August (actual), $325,000; September (actual), $320,000; October (estimated), $250,000; November (estimated), $310,000.

   

Use this information to determine October’s expected cash payments for purchases.

Hardy Company’s cost of goods sold is consistently 60% of sales. The company plans to carry ending merchandise inventory for each month equal to 20% of the next month’s budgeted cost of good sold. All merchandise is purchased on credit, and 50% of the purchases made during a month is paid for in that month. Another 35% is paid for during the first month after purchase, and the remaining 15% is paid for during the second month after purchase. Expected sales are: August (actual), $325,000; September (actual), $320,000; October (estimated), $250,000; November (estimated), $310,000.

Use this information to determine October's expected cash payments for purchases Calculate monthly purchases: August September October November 38,400 $ 195,000 233,400 39,000 194,400 $ 37,200 150,000 187,200 30,000 157,200 30,000 $ Budgeted ending inventory Cost of goods sold (estimated) Required available inventory Budgeted Beginning inventory Required purchases 186,000 192,000 222,000 38,400 183,600 $ Calculate payments made for inventory: Purchases paid in Purchases August September October After October August purchases September purchases October purchases 194,400 183,600 157,200 Determine October's expected cash payments for purchases. October's expected cash payments for purchases

Explanation / Answer

computation of cash budget

particulars august september october 1.sales $ 325,000 $ 320,000 $ 250,000 2.cost of goods sold(1*60%) $ 195,000 $ 192,000 $ 150,000 3.opening inventory (2*20%) $ (39,000) $ (38,400) $ (30,000) 4.closing inventory $ 38,400 $ 30,000 $ 310,000*60%*20%=$ 37,200 5.required purchases (2+4-3) $ 194,400 $ 183,600 $ 157,200 6.payment of october =194,400*15%+183,600*35%+157,200*50%=$ 172,020

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