MC Qu. 81 Brownsville Novelty Store prepared the... Brownsville Novelty Store pr

ID: 2512016 • Letter: M

Question

MC Qu. 81 Brownsville Novelty Store prepared the... Brownsville Novelty Store prepared the following budget information for the month of May Sales are budgeted at $360,000. All sales are on account and a provision for bad debts is made for each month at three percent of sales for the month . Inventory was $84,000 on April 30, an inventory increase of $12.000 is planned for May 31 . All inventory is marked to sell at cost plus 50 percent. . Estimated cash disbursements for selling and administrative expenses for the month are $48,000 Depreciation for May is projected at $6,000 Brownsville's budgeted cost of inventory purchases for Mey is O $120000 o $180,000. O $198.000 O $252.000 O $240.000

Explanation / Answer

Solution:

MCQ 81) Budgeted Cost of Inventory purchases for May = $252,000

May

Budgeted Cost of Goods Sold (Budgeted Sales x 2/3)

$240,000

Plus: Desired Ending Inventory May 31 (Beg 84,000 + Increase 12,000)

$96,000

Total Needs

$336,000

Less: Beginning Inventory April 30

$84,000

Budgeted Cost of Inventory purchases for May

$252,000

82) Budgeted Gross Profit for May = $120,000

Gross Profit = Sales – Cost of Goods Sold

= $360,000 – ($360,000*2/3)

= $360,000 – 240,000

= $120,000

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May