Question

Fosnight Enterprises prepared the following sales​ budget:

Month	Budgeted Sales
March	$6,000
April	$13,000
May	$11,000
June	$20,000

The expected gross profit rate is

20​%

and the inventory at the end of February was

$7,000.

Desired inventory levels at the end of the month are

30​%

of the next​month's cost of goods sold.

What is the desired ending inventory on May​ 31?

A.

$16,000

B.

$1,200

C.

$2,640

D.

$ 4,800

Answer 1

Correct answer----(D) $4800

Calculations

	March	April	May	June
Sales	$       6,000.00	$   13,000.00	$     11,000.00	$   20,000.00
Cost of goods sold (80% of sales)	$       4,800.00	$   10,400.00	$       8,800.00	$   16,000.00
Add: Desired ending Inventory	$       3,120.00	$      2,640.00	$       4,800.00*

*$20000 x 30%