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Hardy Company's cost of goods sold is consistently 60% of sales. The company plans ending merchandise inventory for each month equal to 20% of the
Hardy Company's cost of goods sold is consistently 60% of sales. The company plans ending merchandise inventory for each month equal to 20% of the next month's budgeted cost of goods sold. All merchandise is purchased on credit, and 50% of the purchases made during a month is paid for in that month. Another 45% is paid for during the first month after purchase, and the remaining 5% is paid for during the second month after purchase. Expected sales are August (actual), $355,000; September (actual), $410,000; October (estimated), $280,000; and November (estimated), $410,000. Use this information to determine October's expected cash payments for purchases. Calculate Monthly Purchases: August September October November Budgeted ending inventory Cost of goods sold (estimated) Required available inventory Budgeted beginning inventory Required purchases $ 0 $ 0 $ 0 Calculate Payments Made for Inventory: --------- Purchases paid in -------------- September October After October Purchases August August purchases September purchases October purchases 0 Determine October's Expected Cash Payments for Purchases. October's expected cash payments for purchases
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