Question

Mountaineers Inc. sells its rock-climbing shoes worldwide. Mountaineers Inc. expects to sell 4,000 pairs of shoes for $165.00 each in January, and 2,000 pairs of shoes for $220.00 each in February. All sales are cash only. Prepare the sales budget for January and February. Mountaineers Inc. expects cost of goods sold to average 75 percent of sales revenue, and the company expects to sell 4,600 pairs of shoes in March for $240.00 each. Mountaineers Inc.’s target ending inventory is $18,000.00 plus 45 percent of the next month’s cost of goods sold. Use this information and the sales budget prepared to prepare Mountaineers Inc.’s inventory, purchases, and cost of goods sold budget for January and February.

Answer 1

Answer:

expected sales January, 4,000 pairs of shoes at $165 each = $660,000

expected sales February, 2,000 pairs of shoes at $220 = $440,000

expected COGS = 75% of expected revenue

expected sales March, 4,600 pairs of shoes at $240 = $1,104,000

ending inventory = $18,000 plus 45% of next month's COGS

                  Sales budget  

Month                       January              February             March

Units                           4000                  2000                  4600

Price                           $165                   $220                  $240

Total sales               $660,000         $440,000         $1,104,000

                   

Inventory, Purchases and COGS Budget

                                                       January        February      March

cost of goods sold                        $495,000    $330,000     $828,000

+ desired ending inventory           $166,500    $390,600           ?        

Total merchandise required         $661,500     $720,600           ?

- beginning inventory                   ($315,000)   ($346,500)   ($374,100)

budgeted purchases                    $346,500     $374,100            ?