A tool company plans inventory levels at cost at the end of

A tool company plans inventory levels (at cost) at the end of each month are as follows: Cost of goods sold is 65% of sales. Payments for each month\'s purchase are made respectively (15% during that month, 70% the next month, and the remaining 15% the next month) Prepare budget schedules for June, July, and August for purchases. Prepare budget schedules for June, July, and August for disbursements of purchases.

Solution

June July August Total Sales 449000 359000 306000 1114000 Ans a Budget For Purchases June July August Total Cost of Good Sold (65% of sales) 291850 233350 198900 724100 Add: desired Ending inventory 226000 209000 241000 241000 Total Needs 517850 442350 439900 965100 Less: Beginning Inventory 271000 226000 209000 271000 Purchases 246850 216350 230900 694100 Ans b Disbursement of cash June July August Total Purchases 246850 216350 230900 694100 For April (258000*.15) 38700 38700 For May (188000*.7/.15 in June, July) 131600 28200 159800 For June 37027.5 172795 37027.5 246850 For July 32452.5 151445 183897.5 For August 34635 34635 Total 207327.5 233447.5 223107.5 663882.5 total (round off) 207328 233448 223108 663883