7-28 Purchases and Cost of Goods Sold Popeil Products, a wholesaler of fishing e

Question

7-28 Purchases and Cost of Goods Sold Popeil Products, a wholesaler of fishing equipment, budgeted the following sales for the indicated months June 20X8 $1.850,000 130,000 $1,980,000 July 20x8 $1,920,000 156,000 $2,076,000 August 20x8 $1910,000 Sales on account Cash sales 274,000 Total sales $2 184,000 All merchandise is marked up to sell at its invoice cost plus 20%. Target merchandise inventories at the beginning of cach month are 25% of that month's projected cost of goods sold. 1. Compute the budgeted cost of goods sold for the month of June 20X8. 2. Compute the budgeted merchandise purchases for July 20xs.

Explanation / Answer

1. Budgeted Cost of Goods Sold for June = $ 1,980,000 / 120 x 100 = $ 1,650,000.

2. Budgeted Merchandise Purchase for July:

June July August Budgeted Cost of Goods Sold $ 1,650,000 $ 1,730,000 $ 1,820,000 Desired Ending Inventory 432,500 455,000 Total Inventory Needed 2,185,000 Less: Beginning Inventory ( 25% of COGS) 412,500 432,500 455,000 Budgeted Merchandise Purchases $ 1,752,500

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