At the Northern Company, Sales of $300,00 are forecast for the third quarter. Gross profit is...
At the Northern Company, Sales of $300,00 are forecast for the third quarter. Gross profit is 60% of sales, and beginning inventory is $145,000. If ending inventory is budgeted as $153,000, what are the budgeted Purchases?
| A. |
$165,000 |
|
| B. |
$82,000 |
|
| C. |
$108,000 |
|
| D. |
$128,000 |
Homework Answers
Solution: The answer is
D. $128,000
Reason: Budgeted Purchases = Cost of goods sold - Beginning Inventory + Ending Inventory
=$120,000 (Note:1) - $145,000 + $153,000
= $128,000
Note:
1) Cost of goods sold = Sales - Gross profit = $300,000 - ($300,000 * 60%) = $120,000.
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