Question

Texas Curtain Works is in the process of preparing its budget for next year. Cost of goods sold has been estimated at 70 percent of sales. Fabric purchases and payments are to be made during the month preceding the month of sale. Wages are estimated at 20 percent of sales and are paid during the month of sale. Other operating costs amounting to 25 percent of sales are to be paid in the month following the month of sales. Sales revenue is forecasted as follows:
Month Sales
February $440,000
March $450,000
April $480,000
May $500,000
June $510,000
What is the amount of fabric purchases during the month of March?
a) $480,000
b) $336,000
c) $288,000
d) $300,000

Answer 1

Answer:

b. $336,000

Explanation:

Here, the Fabric purchases & payments are to be made during the month before the month of sale.

The Amount of fabric purchases during the month of march = 70% of sales of the month of April

Purchases of March = 70% * $480,000

Purchases of March = 0.70 *$480,000

Purchases of March = $336,000

So, the amount of fabric purchases during the month of March is $336,000.