Clark’s Retail plans inventory levels (at cost) at the end of each month as foll
ID: 2427600 • Letter: C
Question
Clark’s Retail plans inventory levels (at cost) at the end of each month as follows: May: $271,000, June: $226,000, July: $209,000, and August: $241,000. Sales are expected to be June: $449,000, July: $359,000, August: $306,000. Cost of goods sold is 65% of sales. Purchases in April were $258,000 and in May they were $188,000. Payments for each month’s purchases are made as follows: 15% during that month, 70% the next month, and the final 15% the next month. Prepare budget schedules for June, July, and August for purchases and for disbursements for purchases.
Could someone please explain if this doesn't have an effect on the outcome; "Clark’s Retail plans inventory levels (at cost) at the end of each month as follows: May: $271,000, June: $226,000, July: $209,000, and August: $241,000."
Explanation / Answer
purchase budget april may june july auguest sales 0 449000 359000 306000 cost of goods sold (sales*.65) a 291850 233350 198900 opening inventory (b) 271000 226000 209000 closing invevntory (c) 271000 226000 209000 241000 purchasses (d) = (a+c-b) 258000 188000 246850 216350 230900 payments for purchases first month @15% 37027.5 32452.5 34635 second month @70% 131600 172795 151445 third month @15% 38700 28200 37027.5 Total payments 207327.5 233447.5 223107.5