Spencer Company sells lamps and other lighting fixtures. The purchasing departme

Question

Spencer Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget. Spencer’s policy is to maintain an ending inventory balance equal to 15 percent of the following month’s cost of goods sold. April’s budgeted cost of goods sold is $77,000.

Complete the inventory purchases budget by filling in the missing amounts.

Determine the amount of cost of goods sold the company will report on its first quarter pro forma income statement

Determine the amount of ending inventory the company will report on its pro forma balance sheet at the end of the first quarter

Spencer Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget. Spencer’s policy is to maintain an ending inventory balance equal to 15 percent of the following month’s cost of goods sold. April’s budgeted cost of goods sold is $77,000.

Explanation / Answer

(a)

(b) COGS = Opening nventory + Purchase - Closing Inventory

7950 + (53600+57900+65100) - 11550 = 173000

(c)The Endng inventory for the quarter ended March will be $11550

January February March Budgeted COGS 53000 57000 63000 Desired Ending Inventory 8550 9450 11550 Inventory needed 61550 66450 74550 Opening Inventry 7950 8550 9450 Required Inventory 53600 57900 65100

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