6 The Seten Corporation has a desired ending inventory of 30

6. The Seten Corporation has a desired ending inventory of 30% of the next months estimated sales. In turn, their cost of goods sold is 60% and their forecasted sales for the months of March, April, May, June and July are as follows:

$750,000

$880,000

$700,000

$800,000

$900,000

Purchases for the Months of February and March were $500,000 and $360,000 and their purchases are paid as follows: 10% during the month of the purchase, 80% in the next month and the final 10% in the next month

Prepare budget schedules for the months of April, May, and June for purchases and also for disbursements for purchases

Solution

1)Purchase Budget(April,May and June)

In preparing purchase budget give Cost of sales to be 60% of sales of that month.

Also Mentioned There will be opening stock amount to 30%of Sales(not of Cos) of the month(ie,Closing stock of last month)

On preparing Payment budget we need to make a setup to absorb 10% of purchase in same month previous year\'s 80% and 2months before\'s 10%. That will be easy to work-out As one month\'s whole payment can be btained

Payment budget (April,May and June)

W1)2nd and Third Month Working

Feb

Purchase-500,000 3rd)Payment in April- 500,000*10%=50,000

March

Purchase-360,000 2nd)payment in April-360,000*80%=288,0003rd)PAyment in May=360,000*10%=36,000