Chu Company provided the following information related to its inventory sales an

Question

Chu Company provided the following information related to its inventory sales and purchases for December Year 1 and the first quarter of Year 2:
  

    
Desired ending inventory levels are 31% of the following month's projected cost of goods sold. Budgeted purchases of inventory in February Year 2 would be:

Multiple Choice

$62,300.

$93,840.

$81,200.

$73,700.

Dec. Year 1 Jan. Year 2 Feb. Year 2 Mar. Year 2 (Actual) (Budgeted) (Budgeted) (Budgeted) Cost of goods sold $ 33,000 $ 63,000 $ 83,000 $ 53,000

Explanation / Answer

Answer- $73,700

Purchase of february = Cost of goods sold - opening stock of february+ closing stock of february

= 83,000 - 25730 + 16430

= 73700

opening stock of feb = 31 % of Febuary month's projected cost of goods sold = 25730 Closing stock of feb = 31 % of March month's projected cost of goods sold = 16430

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