Question 1

Collins Retail Ltd plans the following inventory levels at cost on one of the items sold in the store. The closing inventory is as follows: end of

May $1 700 000

June $1 500 000

July $ 1 900 000

August $1 600 000

Sales are expected to be:

June $3 500 000

July $2 500 000

August $3 300 000

Cost of goods sold is at 60% of sales value

The business estimated purchase to be in

April $1 900 000

May $1 600 000

Given months purchases are to be paid as follows:

10% during the month

80% in the next month

10% two months later

Required

1. Prepare a purchase budget for the months of June, July and August
2. Prepare a disbursement budget on purchases for the three months period, June, July and August [25]