Question
Hardy Companys cost of goods sold is consistently 70% of sales. The company plans ending merchandise inventory for each month equal to 30% of the
Hardy Companys cost of goods sold is consistently 70% of sales. The company plans ending merchandise inventory for each month equal to 30% 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), $330,000; October (estimated), $340,000; and November (estimated), $390,000. Use this information to determine Octobers expected cash payments for purchases.
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