Question

Fosnight Enterprises prepared the following sales budget Budgeted Sales $5,000 $14,000 Month March April May $10,000 $14,000 June The expected gross profit rate is 20% and the inventory at the end of February was $12,000. Desired inventory levels at the end of the month are 20 % of the next month's cost of goods sold. What are the total purchases budgeted for April? OA. $10,560 O B. $11.840 O C. $2,240 O D. $13,440

Answer 1

Total Purchase Budget for April 30 Cost of Goods sold $14,000*80 % Ending Inventory= $10,000*80% 20% $11,200.00 $1,600.00 2,240.00 Beginning Inventory 14000*80%*20% Purchases Cost of goods sold Ending Inventory - Beginning inventory 11200+1600-2240 $ 10,560.00 Option (A) is Correct Workings Since Gross profit rate 20% Cost of Goods sold Sales GP So Cost of Goods sold 80%