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Big Sound, a merchandising company specializing in home computer speakers, budgets its monthly cost of goods sold to equal 70% of sales. Its inventory policy
Big Sound, a merchandising company specializing in home computer speakers, budgets its monthly cost of goods sold to equal 70% of sales. Its inventory policy calls for ending inventory at the end of each month to equal 20% of the next month's budgeted cost of goods sold. All purchases are on credit, and 25% of the purchases in a month is paid for in the same month. Another 60% is paid for during the first month after purchase, and the remaining 15% is paid for in the second month after purchase. The following sales budgets are set: July, $350,000; August, $290,000; September, $320,000; October, $275,000; and November, $265,000. (Hint. For part 1, refer to Exhibits 22A.2 and 22A.3 for guidance, but note that budgeted sales are in dollars for this assignment.) (1) Compute the budgeted merchandise purchases for July, August, September, and October. July August September October November Budgeted ending inventory Required available inventory Required purchases 0 0 $ 0 0 (2) Compute the budgeted payments on accounts payable for September and October. Purchases paid in -ORR- WWWDEN Purchases August September October After October July purchases August purchases September purchases October purchases 0 (3) Compute the budgeted ending balances of accounts payable for September and October. September Purchases % unpaid as of September 30 Amount unpaid as of September 30 July purchases August purchases September purchases September 30 budgeted accounts payable October Purchases % unpaid as of October 31 Amount unpaid as of October 31 July purchases August purchases September purchases October purchases October 31 budgeted accounts payable 0
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