Answer:
D. $ 34 comma 160
Explanation:
The movement in the balance of inventory at the start and end of a period is as a result of sales and purchases. While sales reduces the balance in inventory, purchases increases the balance. This may be expressed mathematically as
Opening balance + purchases - cost of goods sold = closing balance
Given that Cost of goods sold 60% of sales and Required ending inventory $ 15 comma 000 + 20% of next month's sales , then
Cost of goods sold for January = 60% * $ 56,600
= $33,960
Required ending inventory for January = $15,000 + 20% * $61,000
= $15,000 + $12,200
= $27,200
$27,000 + budgeted purchases - $33,960 = $27,200
Budgeted purchases for January = $33,960 + $27,200 - $27,000
= $34,160
Answer:
D. $34,160 is the budgeted purchases for the month of January.
Explanation:
a) Budgeted purchases is equal to cost of goods sold plus closing inventory minus opening inventory, i.e. $33,960 + $27,200 - $27,000 = $34,160.
b) Cost of goods sold equals 60% of Sales ($56,600) = $33,960.
c) Closing inventory equal $15,000 + 20% of February Sales ($61,000) = $27,200.
So, to get purchases, we work back from cost of sales and add the closing inventory, which gives the cost of goods available for sale, then we deduct the opening inventory ($27,000, which is given).
