Question
Hardy Companys cost of goods sold is consistently 70% of sales. The company plans ending merchandise inventory for each month equal to 20% of the
Hardy Companys cost of goods sold is consistently 70% of sales. The company plans ending merchandise inventory for each month equal to 20% of the next months budgeted cost of goods sold. All merchandise is purchased on credit, and 40% 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 15% is paid for during the second month after purchase. Expected sales are August (actual), $415,000; September (actual), $360,000; October (estimated), $260,000; and November (estimated), $380,000. Use this information to determine Octobers expected cash payments for purchases.
Calculate Monthly Purchases: August September October November 290,500 252,000 182,000 266,000 Budgeted ending inventory Cost of goods sold (estimated) Required available inventory Budgeted beginning inventory Required purchases 58,100 50,400 36,400 $ (58,100) $ (50,400) $ (36,400) Calculate Payments Made for Inventory: Purchases paid in Purchases August September October After October August purchases September purchases October purchases 0 Determine October's Expected Cash Payments for Purchases. October's expected cash payments for purchasesStep by Step Solution
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