Answer and Explanation:
The preparation is presented below:
Outdoor Company
Inventory, Purchases, and Cost of Goods Sold Budget
Two months Ended January 31 and February 28
Particulars January February March
Sales in units 7,500 units 2,500 units 4,700 units
Sales price $175 $195 $270
Sales in dollars $1,312,500 $487,500 $1,269,000
Percentage of cost of goods sold 60% 60% 60%
Cost of goods sold $787,500 $292,500 $761,400
Add: Desired ending merchandise inventory $185,500 466,840
($292,500 × 60% + $10,000) ($761,400 × 60% + $10,000)
Total merchandise inventory required $973,000 $759,340
Less: Beginning merchandise inventory $482,500 $185,500
($787,500 × 60% + $10,000)
Budgeted purchases $490,500 $573,840
The ending inventory of month of Jan should be beginning inventory of Feb and the same is shown above
