E7-34 (similar to) A Question Help Wetzlar GmbH has adopted the following policies regarding merchandise purchases and inventory. At the end of any month, the inventory should be 17,000 plus 80% of the cost of goods to be sold during the following month. The cost of merchandise sold averages 50% of sales. Purchase terms are generally net, 30 days. A given month's purchases are paid as follows: 40% during that month and 60% during the following month. Purchases in May had been 150,000 and the inventory on May 31 was higher than planned at 270,000. The manager was upset because the inventory was too high. Sales are expected to be June, 320,000; July 300,000; August, 370,000; and September, 380,000. Read the requirements Requirement 1. Compute the amount by which the inventory on May 31 exceeded the company's policies. Inventory on May 31 exceeded the company's policies by 125,000 Requirement 2. Prepare budget schedules for June, July, and August for purchases and for disbursements for purchases. Begin by preparing the budget schedule for purchases for June, July, and August .X June 137,000 160,000 Purchases budget Ending inventory target Plus Cost of goods sold Total inventory needed Less Beginning inventory August 169.000 185.000 Requirements July 165,000 150,000 315,000 (137,000) 178,000 354.000 297,000 (270,000 27,000 (165,000) 189.000 1. Compute the amount by which the inventory on May 31 exceeded the company's policies. 2. Prepare budget schedules for June, July, and August for purchases and for disbursements for purchases. Purchases Now prepare the budget schedule for disbursements for purchases. Print Done June Disbursements for purchases 60% of last month's purchases 40% of this month's purchases 90,000 July 16,200 71,200 August 106,800 75,600 182,400 10.800 100,800 Disbursements for purchases 87,400