Question

College Logos buys​ logo-imprinted merchandise and then sells it to university bookstores. Sales are expected to be $ 2 comma 009 comma 000 in​ September, $ 2 comma 240 comma 000 in​ October, $ 2 comma 379 comma 000 in​ November, and $ 2 comma 520,000 in December. College Logos sets its prices to earn an average 40​% gross profit on sales revenue. The company does not want inventory to fall below $ 425 comma 000 plus 15​% of the next​ month's cost of goods sold.Required:Prepare a cost of goods​ sold, inventory, and purchases budget for the months of October and November.

Answer 1

Answer:

College Logos

Cost of goods sold, inventory, and purchases budget for the months of October and November:

                                                           October             November

Sales                                             $ 2,240,000         $ 2,379,000

Cost of goods sold  60%                 1,344,000             1,427,400

Gross profit, 40% of sales               $896,000             $951,600

Inventory Budget:

Ending Inventory                              $626,600              $639,110

Beginning Inventory                         $606,810             $626,600

Purchases Budget:

Ending Inventory                            $626,600             $639,110

Cost of goods sold                         1,344,000            1,427,400

Cost of goods available for sale $1,970,600         $2,066,510

less Beginning Inventory               $606,810           $626,600

Purchases                                    $1,363,790          $1,439,910

Explanation:

a) Data and Calculations:

                       September      October        November        December

Sales             $ 2,009,000   $ 2,240,000  $ 2,379,000  $ 2,520,000

Cost of goods

 sold  60%       1,205,400        1,344,000       1,427,400       1,512,000

Gross profit     $803,600        $896,000       $951,600    $1,008,000

Ending Inventory $606,810   $626,600         $639,110       $651,800

Beginning Inventory               $606,810          $626,600     $639,110

Purchases:

Ending Inventory $606,810      $626,600         $639,110       $651,800

Cost of goods

 sold                   1,205,400       1,344,000       1,427,400       1,512,000

Cost of goods available

for sale             $1,812,210     $1,970,600    $2,066,510    $2,163,800

less Beginning Inventory          $606,810      $626,600        $639,110

Purchases                               $1,363,790     $1,439,910    $1,524,690