Perry Company has provided the following information: Month ...

[Chelseaamend]

Perry Company has provided the following information:
 
  Month Budgeted Sales
   March 200,000
   April 212,000
   May 204,000
   June 218,000
   July 210,000
 
  In addition, the gross profit rate is 40 and the desired inventory level is 30 of next month's cost of sales.
 
  Required:
  Prepare a purchases budget for April through June.

Question 2

Favata Company has the following information:
 
  Month Budgeted Sales
   June 60,000
   July 51,000
   August 40,000
   September 70,000
   October 72,000
 
  In addition, the cost of goods sold rate is 70 and the desired inventory level is 30 of next month's cost of sales.
 
  Required:
  Prepare a purchases budget for July through September.

[nekcihc358]

Answer to Question 1

Answer: April May June Total
Desired ending inventory 36,720 39,240 37,800 113,760
Add: Cost of goods sold 127,200 122,400 130,800 380,400
Total needed 163,920 161,640 168,600 494,160
Less: Opening inventory 38,160 36,720 39,240 114,120
Total purchases budget 125,760 124,920 129,360 380,040
Explanation: Desired ending inventory is for example for April: 204,000  .60  .30=36,720.
Cost of goods sold is for example for April: 212,000  .60 = 127,200
Opening inventory for example for April: 212,000  .60  .30 = 38,160

Answer to Question 2

Answer: July Aug Sept Total
Desired ending inventory  8,400 14,700 15,120 15,120
Plus COGS 35,700 28,000 49,000 112,700
Total needed 44,100 42,700 64,120 127,820
Less beginning inventory 10,710 8,400 14,700 10,710
Total purchases 33,390 34,300 49,420 117,110

[Chelseaamend]

YES! Correct, THANKS for helping me on my review

[Alyson.hiatt@yahoo.com]

Thanks for the timely response, appreciate it