How to prepare a merchandise purchases budget
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.
How to prepare a merchandise purchases budget
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
Merchandise purchases budget
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.