Requirement $2.$ Prepare the cost of goods$$ sold, inventory, and purchases budget for and $.$

Save A Lot Store

Cost of Goods Sold, Inventory, and Purchases Budget

For the Months of November and December

November

December

Cost of goods sold

$308000$

$369600$

Plus: Desired ending inventory

Total inventory required

Less: Beginning inventoryOctober sales are projected to be $$400,000.$

Sales are projected to increase by $10\%$ in November and another $20\%$ in December

and then return to the October level in January.

$25\%$ of sales are made in cash while the remaining $75\%$ are paid by credit or debit

cards. The credit card companies and banks $($debit card issuers$)$ charge a $2\%$

transaction fee, and deposit the net amount $($sales price less the transaction fee$)$ in

the store's bank account daily. The store does not accept checks. Because of the

payment mechanisms, there is no risk of non$-$payment or bad$-$debts.

The store's gross profit is $30\%$ of its sales revenue.

For the next several months, the store wants to maintain an ending merchandise

inventory equal to $$10,000$ plus $15\%$ of the next month's cost of goods sold. All

purchases for merchandise are made on account and paid in the month following

the purchase. The September $30$ inventory is expected to be $$52,000.$

Expected monthly operating expenses and details about payments include

the following:

Wages of store workers should be $$7,200$ per month and are paid on the last day

of each month.

Utilities expense is expected to be $$1,100$ per month in September, October, and

November.

Utilities expense is expected to be $$1,900$ per month during the colder months of

December, January, and February.

All utility bills are paid the month after incurred.

Property tax is $$28,800$ per year and is paid semiannually each December and

June.

Property and liability insurance is $$10,800$ per year and is paid semiannually

each January and July.

Depreciation expense is $$216,000$ per year, the straight$-$line method used.

Transaction fees, as stated earlier, are $2\%$ of credit and debit card sales.

Cash dividends of $$250,000$ are to be paid in December.

Assume the cash balance on October $31$ is $$15,000.$ The company wants to

maintain a cash balance of at least $$15,000$ at the end of every month.

The company has arranged a line of credit with a local bank at a $4\%$ interest rate.

There is no outstanding debt as of October $31.$

Purchases