XYZ Company prices its products by adding 30% to its cost. XYZ anticipates sales of $715,000 in March, $728,000 in April, and $624,000 in May. XYZs policy is to have on hand enough inventories at the end of the month to cover 25% of the next months sales. What will be the cost of the inventory that ABC should budget for purchases in April? Please and explain your work. Be sure to use APA formatting.

Solution:

Cost of Inventory = Sales price/1.3
March cost of inventory	$715,000/1.3	$550,000
April cost of inventory	$728,000/1.3	$560,000
May cost of inventory	$624,000/1.3	$480,000

Ending Inventory = Beginning inventory + purchases cost of goods sold (cogs)
April ending inventory	$480,000 x 25%	$120,000
Beginning inventory	$560,000 x 25%	$140,000
$120,000 = $140,000 + purchases cost of goods sold (cogs)