Brarin Corporation is a small wholesaler of gourmet food products. Data regardin

Question

Brarin Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow: * Sales are budgeted at $360,000 for November, $380,000 for December, and $370,000 for January. * Collections are expected to be 50% in the month of sale, 49% in the month following the sale, and 1% uncollectible. * The cost of goods sold is 85% of sales. * The company would like to maintain ending merchandise inventories equal to 75% of the next month's cost of goods sold. *Payment for merchandise is made in the month following the purchase. * Other monthly expenses to be paid in cash are $23,300. * Monthly depreciation is $21,200. * Ignore taxes. The cost of December merchandise purchases would be: A) $235,875 B) $323,000 C) $316,625 D) $306,000

Explanation / Answer

Hi, Please find the answer as follows: Opening Stock (December) = 380000*.85*.75 = 242250 Closing Stock (December) = 380000*.85*.75 = 235875 Cost of Goods Sold (December) = 380000*.85 = 323000 Cost of Goods Sold = Opening Stock + Purchases - Closing Stock Purchases = 323000 - 242250 + 235875 = 316625 Option C is correct. Thanks.

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