Question

Executive officers of Zachary Company are wrestling with their budget for the next year. The following are two different sales estimates provided by two difference sources. Source of Estimate Sales manager Marketing consultant First Quarter $377,000 522,000 Second Quarter $303,000 462,000 Third Quarter $272,000 415,000 Fourth Quarter $485,000 650,000 Zachary's past experience indicates that cost of goods sold is about 60 percent of sales revenue. The company tries to maintain 15 percent of the next quarter's expected cost of goods sold as the current quarter's ending inventory. This year's ending inventory is $32,000. Next year's ending inventory is budgeted to be $33,000. 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. Complete this question by entering your answers in the tabs below. Required A Required B Prepare an inventory purchases budget using the sales manager's estimate. (Round your final answers to nearest whole dollar amount.) First Quarter $ 377,000 Second Quarter $ 303,000 Third Quarter TH $ 272,000 Fourth Quarter $ 485,000 Sales Cost of goods sold Plus: Desired ending inventory Total inventory needed 0 0 0 Required purchases $ 0 $ 0 $ 0 $ 0 Required A Required B >

Answer 1

SOLUTION

1.

	First Quarter	Second Quarter	Third Quarter	Fourth Quarter
Sales	377,000	303,000	272,000	485,000
Cost of goods sold (60% of sales)	226,200	181,800	163,200	291,000
Add: Desired ending inventory (15%*181,800), (15%*163,200), (15%*291,000)	27,270	24,480	43,650	33,000
Total inventory needed	253,470	206,280	206,850	324,000
Less: Beginning inventory	(32,000)	(27,270)	(24,480)	(43,650)
Required purchases	221,470	179,010	182,370	280,350

2.

	First Quarter	Second Quarter	Third Quarter	Fourth Quarter
Sales	522,000	462,000	415,000	650,000
Cost of goods sold (60% of sales)	313,200	277,200	249,000	390,000
Add: Desired ending inventory (15%*277,200), (15%*249,000), (15%*390,000)	41,580	37,350	58,500	33,000
Total inventory needed	354,780	314,550	307,500	423,000
Less: Beginning inventory	(32,000)	(41,580)	(37,350)	(58,500)
Required purchases	322,780	272,970	270,150	364,500