Question

Company expects to sell 8,000 units for $165 each for a total of $1,320,000 in January and 1,500 units for $195 each for a total of $292,500 in February.

The company expects cost of goods sold to average 50​% of sales​ revenue, and the company expects to sell 4,700 units in March for $260 each. Arete​'s target ending inventory is $17,000 plus 60​% of the next​month's cost of goods sold.

Prepare Arete​'s inventory, purchases, and cost of goods sold budget for January and February.

Answer 1

Arete Company
Inventory, purchases, and cost of goods sold budget
Two Months Ended January 31 and February 28
	January	February
Cost of goods sold	$660,000	$146,250
Plus: Desired ending merchandise inventory	$104,750	$383,600
Total merchandise inventory required	$764,750	$529,850
Less: Beginning merchandise inventory	-	$104,750
Budgeted purchases	$764,750	$425,100
Working
	January	February	March
Cost of goods sold	($1,320,000*50%)	($292,500*50%)	$611,000
Plus: Desired ending merchandise inventory	($17,000+ $146,250*60%)	($17000+ $611,000*60%)
Total merchandise inventory required
Less: Beginning merchandise inventory	-	($17,000+ $146,250*60%)
Budgeted purchases