Suppose Everypage sells 1700 hardcover books per day at an a

Suppose Everypage sells 1,700 hardcover books per day at an average price of $60. Assume that Everypage\'s cost for the books is 85?% of the selling price it charges retail customers. Everypage has no beginning? inventory, but it wants to have a? three-day supply of ending inventory. Assume that selling and administrative expenses are $5,100 per day. Determine Everypage\'s budgeted purchases for the next? (seven-day) week.

A. $606,900

B. $1,020,000

C. $346,800

D. $867,000

Solution

Solution: Answer is D. $867,000 Working Notes: Purchases = Cost of goods sold + Ending merchandise inventory - Beginning merchandise inventory Cost of goods sold =Selling price × cost for the books × daily sales units × days in a week =$60 x 85% x 1700 x 7 days =$606,900 Ending merchandise inventory = Daily sales × 3 days × Selling price × cost for the books =1700 x 3 x 60 x 85% =260,100 Beginning merchandise inventory = $0 Purchases = Cost of goods sold + Ending merchandise inventory - Beginning merchandise inventory Purchases = $606,900 + $260,100 - $0 Purchases = $867,000 Notes: selling and administrative expenses are not part of inventory cost. Please feel free to ask if anything about above solution in comment section of the question.