Question

At the beginning of 2013, Ralston Mills has an inventory of $300,000. Because sales growth was strong during 2013, the company wants to increase inventory on hand to $350,000 at December 31, 2013. If net sales for 2013 are expected to be $1,500,000, and the gross profit rate is expected to be 30%, what is the cost of the merchandise the company should expect to purchase during 2013?
A. $1,100,000.
B. $1,500,000.
C. $1,700,000.
D. $1,050,000.

Answer 1

Answer:

A. $1,100,000

Explanation:

total sales = $1,500,000

gross profit rate is expected to be 30% so cost of merchandise which is sold = 1,500,000 * (1-0.3)

           = $1,050,000.

Now inventory is mentioned in terms of cost of merchandise we want to add 50000 more towards the end so total cost of merchandise = 1,050,000 + 50000 = $1100000

Therefore, The cost of the merchandise the company should expect to purchase during 2013 is $1100000