Executive officers of Jordan Company are wrestling with their budget for the nex
ID: 2538825 • Letter: E
Question
Executive officers of Jordan Company are wrestling with their budget for the next year. The following are two different sales estimates provided by two difference sources:
Jordan’s past experience indicates that cost of goods sold is about 55 percent of sales revenue. The company tries to maintain 10 percent of the next quarter’s expected cost of goods sold as the current quarter’s ending inventory. This year’s ending inventory is $32,000. Next year’s ending inventory is budgeted to be $33,000.
Required
Prepare an inventory purchases budget using the sales manager’s estimate.
Prepare an inventory purchases budget using the marketing consultant’s estimate.
Required A
Required B
Prepare an inventory purchases budget using the sales manager’s estimate. (Round your final answers to nearest whole dollar amount.)
Required B
Prepare an inventory purchases budget using the marketing consultant’s estimate. (Round your final answers to nearest whole dollar amount.)
Source of Estimate First Quarter Second Quarter Third Quarter Fourth Quarter Sales manager $ 377,000 $ 316,000 $ 275,000 $ 482,000 Marketing consultant 511,000 456,000 402,000 658,000Explanation / Answer
Required A
Inventory purchases budget using the sales manager’s estimate.
Requirement B
Estimates based on marketing consultant's estimates
Note:
Cost of goods sold: cost of goods sold amount is 55% of the sales for that quarter
Desired ending inventory: for the first 3 quarters it is equal to 10 % of cost of goods sold of next quarter and cost of goods sold is again 55% of sales for the respective quarter. for the 4th quarter desired inventory is given.
First Quarter Second Quarter Third Quarter Fourth Quarter Sales $ 377,000 $ 316,000 $ 275,000 $ 482,000 Cost of goods sold (55% of sales above) $ 207,350 $ 173,800 $ 151,250 $ 265,100 [377000* 55%] [316000* 55%] [275000* 55%] [482000* 55%] Plus: Desired ending inventory $ 17,380 $ 15,125 $ 26,510 $ 33,000 [316000* 55% * 10%] [275000* 55% * 10%] [482000* 55% * 10%] Total inventory needed $ 224,730 $ 188,925 $ 177,760 $ 298,100 Less: Beginning inventory $ 32,000 $ 17,380 $ 15,125 $ 26,510 Required purchases $ 192,730 $ 171,545 $ 162,635 $ 271,590Related Questions
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