Question

Marigold Company estimates that 2017 sales will be $42,500 in quarter 1, $53,700 in quarter 2, and $65,700 in quarter 3. Cost of goods sold is 50% of sales. Management desires to have ending finished goods inventory equal to 22% of the next quarter’s expected cost of goods sold. Prepare a merchandise purchases budget by quarter for the first 6 months of 2017.

Answer 1

Answer:

• Prepare a merchandise purchases budget by quarter for the first 6 months of 2017.

$ 50.652  

Explanation:

Each month the company has to purchase the inventory to the next quarter and cover the cost of goods of the current quarter which is the costo of good of the months minus the initial inventory.

Quarter 1    -  Quarter 2  -   Quarter 3

$42,500     -  $53,700     -   $65,700   - Sales

$21,250      -  $26,850     -  $32,850 -  Cost of Goods

$4,675       -  $5,907       -    $7,227   -   Initial Inventory

$22,482     -    $28,170   -     ------------- Merchandises Purchases

Total Merchandise purchases for the first two quarters :

$50,562 = $22,482 + $28,170

$22,482 = $21,250 - $4,675 + $5,907

$28,170 = $26,850 - $5,907 + $7,227