XYZ budgeted sales: Jan.($120,000); Feb.($108,000); Mar.($140,000); Apr.($147,000). Gross profit is 35% of sales. Inventory on Jan. 1st is $29,600 and target ending inventory is 10% of next month's sales, stated at cost. Purchases budgeted for January is:

Purchases= $55,420

Explanation:

Giving the following information:

Sales:

Jan.($120,000)

Feb.($108,000)

Gross profit is 35% of sales.

Inventory on Jan. 1st is $29,600.

Target ending inventory is 10% of next month's sales.

To calculate purchases for January, we need to use the following formula:

Purchases= Production + desired ending inventory - beginning inventory

COGS January= 120,000*0.65= 78,000

COGS February= 108,000*0.65= 70,200

Purchases= 78,000 + (70,200*0.1) - 29,600

Purchases= $55,420

explanation:

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