Question 5: (10 Marks)

Armidale Motor Company (AMC) 2021 books contain the following pieces of information:

Month Budgeted Sales

January $6000

February 5100

March 4000

April 7000

May 7200

Armidale Motor Company (AMC) track record shows that 80% of its total sales revenue in a month is its cost of goods sold (COGS). Furthermore, for any month, AMC management aims to keep a desired closing inventory of 50% of the next months cost of goods sold.

Required: Make a purchases budget for AMC for February, March and April, with a column for Totals, using the format below:

Purchases budget

Feb Mar April Totals

Desired closing inventory

Plus Cost of Goods Sold

Total needed

Less beginning inventory

Total purchases