Precious Stones Ltd. is a retail jeweler. Most of the firm?s business is in jewelry and watches. The firm?s average gross profit ratio for jewelry and watches is 70% and 40%, respectively. The sales forecast for the next two months for each product category is as follows:

The company?s policy, which is expected to be achieved at the end of April, is to have ending inventory equal to 150% of the next month?s cost of goods sold.

Required:

a. Calculate the cost of goods sold for jewelry and watches for May and June.

b. Calculate a purchases budget, in dollars, for each product for the month of May.

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Watches Jewelry May $186,000 144,000 $90,000 76,500 June