Prepare inventory, purchases, and cost of goods sold budget (Learning}

Objective 2)

Leno sells tire rims. Its sales budget for the nine months ended September 30 follows:

In the past, cost of goods sold has been \(60 \%\) of total sales. The director of marketing and the financial vice president agree that each quarter's ending inventory should not be below \(\$ 20,000\) plus \(10 \%\) of cost of goods sold for the following quarter. The marketing director expects sales of \(\$ 220,000\) during the fourth quarter. The January 1 inventory was \(\$ 19,000\).
Prepare an inventory, purchases, and cost of goods sold budget for each of the first three quarters of the year. Compute cost of goods sold for the entire nine-month period (use Exhibit 10-8 as a model).

Transcribed Image Text:

Quarter Ended Nine-Month March 31 June 30. Sept. 30 Total Cash sales, 30% Credit sales, 70% Total sales, 100% $ 30,000 $ 45,000 70,000 $100,000 105,000 $ 37,500 $112,500 87,500 262,500 $150,000 $125,000 $375,000