GHI Company has a broad range of products it sells in a four-state area. Sales f

Question

GHI Company has a broad range of products it sells in a four-state area. Sales for the four quarters of 2016 are expected to be $548,000, $689,000, $704,000, and $650,000, for an annual total of $2,591,000.

Cost of goods sold averages 45% of sales. Ending inventory for each quarter should be 30% of cost of goods sold for the following quarter. Inventory at January 1 is expected to be $80,000.

Required:

Show calculations for ending inventory, purchases, and cost of goods sold for the first three quarters of 2016.

Briefly, how did GHI develop the sales estimates for next year?

Explanation / Answer

Compute the Ending Inventory, Purchases, And Cost of Goods Sold.

Particulars Previous year Quarter Q1 Q2 Q3 Q4 Sales 548000 689000 704000 650000 2591000 Cost of Goods sold @45% of sales   (A) 246600 310050 316800 292500 1165950 Ending Inventory @30% ofNext Quarter COGS      (B) 73980 93015 95040 87750 Beginning Inventory (Last quarter Closing) © 73980 93015 95040 87750 Purchases (A+B-C) 265635 312075 309510

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