Question

The following information pertains to the January operating budget for Casey Corporation.

        ∙       Budgeted sales for January $200,000 and February $107,000.

        ∙       Collections for sales are 40% in the month of sale and 60% the next month.

        ∙       Gross margin is 25% of sales.

        ∙       Administrative costs are $11,000 each month.

        ∙       Beginning accounts receivable is $26,000.

        ∙       Beginning inventory is $15,000.

        ∙       Beginning accounts payable is $68,000. (All from inventory purchases.)

        ∙       Purchases are paid in full the following month.

        ∙       Desired ending inventory is 25% of next month's cost of goods sold (COGS).

For January, budgeted cost of goods sold is ________.

Group of answer choices

$200,000

$150,000

$135,000

$72,600

Answer 1

Answer: Budgeted Cost of goods Sold    = Budgeted Sales (-) Gross Profit                                                                = $200,000 (-) ($200,000 * 25%)                                                                = $200,000 (-) $50,000 Budgeted Cost of goods Sold    = $150,000

From given options, option (b) is correct i.e., $150,000