Arete Company expects to sell 7,500 units for S165 each for a total of S1,237,50

Question

Arete Company expects to sell 7,500 units for S165 each for a total of S1,237,500 in January and 2,500 units for $185 each for a total of $462,500 in February. The company expects cost of goods sold to average 70% of sales revenue, and the company expects to sell 4 200 units in March for S300 each. A ete's arget ending inventory IS $10,000 pus 40% o the next month's cost of goods sold. Prepare Arete's mento purchases and cost o goods sold budget fo January and February Arete Company Inventory, Purchases, and Cost of Goods Sold Budget Two months Ended January 31 and February 28 January Februany Cost of goods sold Plus: Desired ending merchandise inventory Total merchandise inventory required Less: Beginning merchandise inventory Budgeted purchases

Explanation / Answer

January February Cost of goods sold 866250 323750 Plus: Desired ending merchandise inventory 139500 514000 Total merchandise inventory required 1005750 837750 Less: Beginning merchandise inventory 356500 139500 Budgeted purchases 649250 698250

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