Question

Outdoor Company expects to sell 7 comma 500 units for $ 175 each for a total of $ 1 comma 312 comma 500 in January and 2 comma 500 units for $ 195 each for a total of $ 487 comma 500 in February. The company expects cost of goods sold to average 60​% of sales​ revenue, and the company expects to sell 4 comma 700 units in March for $ 270 each. Outdoor​'s target ending inventory is $ 10 comma 000 plus 60​% of the next​ month's cost of goods sold. Prepare Outdoor​'s ​inventory, purchases, and cost of goods sold budget for January and February. Outdoor 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

Answer 1

Answer and Explanation:

The preparation is presented below:

Outdoor Company

Inventory, Purchases, and Cost of Goods Sold Budget

Two months Ended January 31 and February 28

Particulars January February March

Sales in units 7,500 units 2,500 units 4,700 units

Sales price $175 $195 $270

Sales in dollars $1,312,500 $487,500 $1,269,000

Percentage of cost of goods sold 60% 60% 60%

Cost of goods sold $787,500 $292,500 $761,400

Add: Desired ending merchandise inventory $185,500 466,840

($292,500 × 60% + $10,000) ($761,400 × 60% + $10,000)

Total merchandise inventory required $973,000 $759,340

Less: Beginning merchandise inventory $482,500 $185,500

($787,500 × 60% + $10,000)

Budgeted purchases $490,500 $573,840

The ending inventory of month of Jan should be beginning inventory of Feb and the same is shown above