Zeller Company estimates that 2017 sales will be $40,000 in quarter 1, $48,000 in quarter 2, and $58,000 in quarter 3. Cost of goods sold is 50% of sales. Management desires to have ending finished goods inventory equal to 10% of the next quarter's expected cost of goods sold. Prepare a merchandise purchases budget by quarter for the first 6 months of 2017.

Question

Business

Osborn

2 January, 15:08

Zeller Company estimates that 2017 sales will be $40,000 in quarter 1, $48,000 in quarter 2, and $58,000 in quarter 3. Cost of goods sold is 50% of sales. Management desires to have ending finished goods inventory equal to 10% of the next quarter's expected cost of goods sold. Prepare a merchandise purchases budget by quarter for the first 6 months of 2017.

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Julianna Benjamin · Answer 1

Answer and Explanation:

As per the data given in the question,

Quarter

1 2 6 month

Budgeted cost of goods sold (40,000*0.50) (48,000*0.50) $44,000

$20,000 $24,000

Add: Desired ending inventory (24,000*0.10) (58,000*0.10) $8,200

$2,400 $5,800

Total required units $20,000+$2,400 $24,000+$5,800 $52,200

$22,400 $29,800

Less: Begin. merchandise inv. $20,000*0.10 $24,000*0.10 $4,400

$2,000 $2,400

Budgeted purchase $20,400 $27,000 $47,800