Question

Wallace Company provides the following data for next year: Month Budgeted Sales January $120,000 February 108,000 March 132,000 April 144,000 The gross profit rate is 40% of sales. Inventory at the end of December is $21,600 and target ending inventory levels are 30% of next month's sales, stated at cost. Purchases budgeted for January total:

Answer 1

Answer:

$69,840

Explanation:

Data provided;

Month        Budgeted Sales

January      $120,000

February    $108,000

March         $132,000

April            $144,000

Gross profit rate is 40% of sales it means cost of goods sold is 60% of sales

Target ending inventory levels = 30% = 0.3

Therefore,

Purchases budgeted for January total

= ( $120,000 × 0.6 ) + ( $108,000 × 0.6 × 0.3 ) - $21,600

= $72,000 + $19,440 - $21,600

= $69,840