Executive officers of Stoneham Company are wrestling with their budget for the n

Question

Executive officers of Stoneham Company are wrestling with their budget for the next year. The following are two different sales estimates provided by two difference sources First Quarter Second Quarter Third Quarter Source of Estimate Sales manager Marketing consultant Fourth Quarter $225,000 $180,000 $160,000 $270,000 300,000 240,000 210,000 350,000 Stoneham's past experience indicates that cost of goods sold is about 60 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 15,000. Next year's ending inventory is budgeted to be $18,000. Required a. Prepare an inventory purchases budget using the sales manager's estimate. b. Prepare an inventory purchases budget using the marketing consultant's estimate

Explanation / Answer

Sales Manager Particulars Q1 Q2 Q3 Q4 Sales 225,000 180,000 160,000 270000 Cost of Goods Sold (60%) 135,000 108,000 96,000 162,000 Add: Ending Inventory (10% of next month Cost) 10800 9600 16200 18000 Less: Opening Inventory 15000 10800 9600 16200 Budgeted Purchase 130,800 106,800 102,600 163,800 Marketing Consultant Particulars Q1 Q2 Q3 Q4 Sales 300,000 240,000 210,000 350000 Cost of Goods Sold (60%) 180,000 144,000 126,000 210,000 Add: Ending Inventory (10% of next month Cost) 14400 12600 21000 18000 Less: Opening Inventory 15000 14400 12600 21000 Budgeted Purchase 179,400 142,200 134,400 207,000

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