Company expects to sell 9,000 units for $200 each for a total of $1,800,000 in J

Question

Company expects to sell 9,000 units for $200 each for a total of $1,800,000 in January and 4,000 units for $190 each for a total of $760,000 in February. The company expects cost of goods sold to average 70% of sales revenue, and the company expects to sell 4,600 units in March for $230 each. Packer's target ending inventory is $20,000 plus 40% of the next month's cost of goods sold. Prepare Packer's inventory, purchases, and cost of goods sold budget for January and February. Packer Company Inventory, Purchases, and Cost of Goods Sold Budget Two months Ended January 31 and February 28 January February Cost of goods sold Plus: Desired ending merchandise inventory Total merchandise inventory required Less: Beginning merchandise inventory Budgeted purchases

Explanation / Answer

Prepare Packer's inventory, purchases, and cost of goods sold budget for January and February

January February Cost of goods sold 1800000*70%=1260000 760000*70%=532000 Add: Desired ending inventory (532000*40%+20000) = 232800 (4600*230*70%*40%+20000)=316240 Total needs 1492800 848240 Less: Beginning inventory (524000) (232800) Budgeted purchase 968800 615440

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