My question is when you need to prepare merchandise purchases budget and you have the past month inventory but no actual sales how do you get the desired ending inventory? Example:

Oct. Inventory 160,000
Nov. budgeted sales.. 300,000
Dec. budgeted sales.. 270,000

C.O.G.S 60%
Company purchases 60% in the month prior to the purchase
And 40% in the month of purchase

I feel there should be more information to this part to make it possible to find the calculations what is it that I don't see? This one is similar to another question I saw posted using a problem from a Gas Co. question, but I didn't quite follow what the answer was to that one either.

Purchases budget is: COGS + ENDING INVENTORY - BEGINNING INVENTORY

You are right, there should some information regarding the level of inventory desired by the management without which you can not construct a purchases budget.

In budgeting process you need not consider the actual sales as the budget is for the future and the actual results are past events.

help I don't think I am doing this correctly

B.) Merchandise Purchases Budget: Nov Dec Total
Budgeted C.O.G.S 234,000 222,000 456,000
Add: desired ending inventory 225,600 226,200 451,800
Total needs 459,600 448,200 907,800
Less beginning inventory 163,800 225,600 389,400
Required needs $295,800 $222,600 $518,400

C.O.G.S = Nov:390,000 sales*6% Dec: 370,000*6% & Jan: 38,000*6% (6% is the cogs)
Ending inventory = 30% of the purchase in month of sale and 70% in the prior month
beginning inventory= October was given @ 163,800 and Dec = Nov ending inventory.
I just don't think I am doing this right.

B.) Merchandise Purchases Budget: Nov Dec Total
Budgeted C.O.G.S 253,200 211,200 464,400
Add: desired ending inventory 223,800 222,960 446,760
Total needs 477,000 434,160 911,160
Less beginning inventory 163,800 223,800 387,600
Required needs $313,200 $210,360 $523,560

The difference with this is that I used the cash sales from the figures from the cash collections:

A.)Schedule of Expected Cash Collections: Nov Dec Total
A/R 71,000 71,000
Nov sales (=$390,000*.9*.05)          351,000 19,500 370,500
Dec sales ($370,000*.9*.05)  333,000 333,000
Total cash collections $422,000 $352,000 $774,500

B.) Merchandise Purchases Budget: Nov Dec Total
Budgeted C.O.G.S (60% of sales) 211,200 228,000 464,400
Purchases: 30% in the month of sale 75,960 63,360 139,320
70% in the month prior to sale 147,840 159,600 307,440
Required needs $223,800 $222,960 $446,760
I am not sure if I set this one up correctly I don't think I have. I also need to know how to calculate the purchases on the cash budget. Do I calculate the purchases by payment being made in the month following? (which is what the problem states) This is what I have for that part:

C.) Cash Budget Nov Dec Total
Cash balance, beginning 25,000 183,400 208,400
Add receipts 422,000 352,000 774,000
Total cash available 447,000 535,400 982,400
Less disbursements:
Purchases $223,800 $222,960 $446,760
Monthly expenses 21,800 21,800 43,600
Depreciation 18,000 18,000 36,000
Total dispursements 263,600 $262,760 $526,360
Excess (def.) of receipts over dispursements 183,400 $272,640 $456,040
Cash balance, ending $183,400 $272,640 $272,640
I really could use some help I am sorry for all the questions but I don't really know how to use this and I can't delete for some reason. So this one is the best I can do in formatting this question.

I'm still trying to figure out how you can "purchase" 60% in the month prior to the "purchase."

Quote:

---

C.O.G.S = Nov:390,000 sales*6% Dec: 370,000*6% & Jan: 38,000*6% (6% is the cogs)
Ending inventory = 30% of the purchase in month of sale and 70% in the prior month
beginning inventory= October was given @ 163,800 and Dec = Nov ending inventory.
I just don't think I am doing this right.

---

Please re-write this EXACTLY how it's written in the problem. This stuff can get really hard to follow, and trying to shortcut and paraphrase can screw up the entire meaning. I already figured out you meant 60% (simply cause 6% makes no sense). However, it doesn't make one bit of sense that your desired ending inventory would include 30% of what you're selling that month. If you already sold it, how can it be part of your desired ending inventory? So something is screwy in there, and that something is some bit of instruction you've left out or re-written. And from looking at all your posts, you're using that word "purchases" willy nilly instead of where it needs to be used. "Purchase" means to buy something. Your bottom number on your purchases budget is the amount you need to "purchase." So everything else can't be "purchases" as well. If you don't try to paraphrase instructions, that wouldn't be happening.

I can't check the second one at all because I have no idea where any of the numbers came from.

Putting 4 problems in a thread, shortcutting instructions, or not even including info from the problem at all... you are making it extremely difficult for anyone to attempt to help you. I'm trying, but you're making it awful difficult.

[QUOTE]

Quote:

---

Originally Posted by kacct21

B.) Merchandise Purchases Budget: Nov Dec Total
Budgeted C.O.G.S (60% of sales) 211,200 228,000 464,400
Purchases: 30% in the month of sale 75,960 63,360 139,320
70% in the month prior to sale 147,840 159,600 307,440
Required needs $223,800 $222,960 $446,760
I am not sure if I set this one up correctly I don't think I have. I also need to know how to calculate the purchases on the cash budget. Do I calculate the purchases by payment being made in the month following? (which is what the problem states) This is what I have for that part:

---

I'm not checking the second part without knowing that the first part is correct. And I can't check the first part without the instructions. I can only repeat you're making it very difficult for anyone to check anything. No one can check your work if they don't have the instructions, all of them, copied verbatim out of the problem.

Since this is like the other problem, I'm going to repeat that you need to learn how to do one of these first. Take that and apply it to another.

I can tell you what above doesn't make any sense. Your "required needs" is probably actually the "purchases." I suspect what you're calling "purchases" is actually your "required needs" for the month. Just calling it the wrong name is confusing. I doubt very seriously your actual purchases are only 30% of the current month. Since you're the one setting it up, I can't trust what is written. I want to see what the instructions are actually saying.

PLEASE POST THE ENTIRE PROBLEM WITH THE ENTIRE INSTRUCTIONS.

As you can see, all your short cutting (apparently to save time) is simply taking more time. These problems are just too precarious in the information to be doing that.