Question

Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:Sales are budgeted at $303,000 for November, $323,000 for December, and $223,000 for January.Collections are expected to be 70% in the month of sale and 30% in the month following the sale.The cost of goods sold is 75% of sales.The company desires to have an ending merchandise inventory at the end of each month equal to 80% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase.Other monthly expenses to be paid in cash are $22,400.Monthly depreciation is $27,500.Ignore taxes.Balance SheetOctober 31Assets Cash $ 33,000Accounts receivable 83,500Merchandise inventory 181,800Property, plant and equipment, net of $624,000 accumulated depreciation 918,000Total assets $ 1,216,300Liabilities and Stockholders' Equity Accounts payable $ 252,000Common stock 753,000Retained earnings 211,300Total liabilities and stockholders' equity $ 1,216,300The cost of December merchandise purchases would be: _______.

Answer 1

Answer:

$263,000

Explanation:

                                      November        December          January

budgeted sales             303,000            323,000            223,000

collections                      212,100             226,100             156,100

                                                                  90,900               96,900

cost of goods sold        227,250            242,250             167,250

ending inventory           193,800             133,800

payment for merchandise                       227,250             242,250

other monthly exp.         22,400               22,400               22,400

depreciation                    27,500               27,500               27,500

The cost of December merchandise purchases would be:

total budgeted sales $323,000

+ desired ending inventory $133,800

total merchandise needed $456,800

- beginning inventory ($193,800)

total budgeted purchases $263,000