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 market¬ ing 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).

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