Big Sound, a merchandising company specializing in home computer speakers, budge
ID: 2472596 • Letter: B
Question
Big Sound, a merchandising company specializing in home computer speakers, budgets its monthly cost of goods sold to equal 70% of sales. Its inventory policy calls for ending inventory in each month to equal 20% of the next month’s budgeted cost of goods sold. All purchases are on credit, and 10% of the purchases in a month is paid for in the same month. Another 10% is paid for during the first month after purchase, and the remaining 80% is paid for in the second month after purchase. The following sales budgets are set: July, $500,000; August, $440,000; September, $470,000; October, $425,000; and November, $415,000. (Hint: For part 1, refer to Exhibits 22A.1 and 22A.2 for guidance, but note that budgeted sales are in dollars for this assignment.) compute the budget merchandise purchase for July august ,september and october. compute the budgeted payments on accounts payable for september and october.
Explanation / Answer
Answer
Figures in $
Particulars
June
July
August
September
October
November
Sales
500000
440000
470000
425000
415000
Cost of goods sold
a
350000
308000
329000
297500
290500
(70% of sales)
Ending inventory
b
70000
61600
65800
59500
58100
20% of the next month’s budgeted cost of goods sold
Total goods available for sale (a+b)
c
411600
373800
388500
355600
Opening inventory
d
70000
61600
65800
59500
Goods to be purchased (c-d)
e
341600
312200
322700
296100
Payment of purchase of goods
10% of the purchases in a month is paid for in the same month
f
34160
31220
32270
29610
Another 10% is paid for during the first month after purchase
g
34160
31220
32270
The remaining 80% is paid for in the second month after purchase
h
273280
249760
Total payment (f+g+h)
336770
311640
Figures in $
Particulars
June
July
August
September
October
November
Sales
500000
440000
470000
425000
415000
Cost of goods sold
a
350000
308000
329000
297500
290500
(70% of sales)
Ending inventory
b
70000
61600
65800
59500
58100
20% of the next month’s budgeted cost of goods sold
Total goods available for sale (a+b)
c
411600
373800
388500
355600
Opening inventory
d
70000
61600
65800
59500
Goods to be purchased (c-d)
e
341600
312200
322700
296100
Payment of purchase of goods
10% of the purchases in a month is paid for in the same month
f
34160
31220
32270
29610
Another 10% is paid for during the first month after purchase
g
34160
31220
32270
The remaining 80% is paid for in the second month after purchase
h
273280
249760
Total payment (f+g+h)
336770
311640
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