Question
In: Accounting
DGT industries expects to sell 420 units of product a and 420 units of product b...
DGT
industries expects to sell 420 units of product a and 420 units of
product b each day at an average price of $18 for product a and $28
for product b . The expected cost for product a is 42% of its
selling price and the expected cost for product b is 58% of its
selling price. DGT industries has no beginning inventory but it
wants to have a six day supply of ending inventory for each
product. Compute the budgeted purchases for the next (seven day )
week. Round to nearest dollar
Solutions
Expert Solution
Purchase = cost of good sold + ending merchandise inventory -
beginning merchandise inventory
Cost of good sold:
Product a =($18×42%)× (420×7)
= $7.56× 2940
= $22,226
Product b = ($28×58%) ×(420×7)
= $16.24× 2940
= $47,746
Total cost of good sold= $22,226+ $47,746
= $69,972
Desired ending inventory = (Daily sales × 6 days) × (selling price
× expected cost)
Product a = (420 × 6) ×( $18 × 42%)
= 2520 × $7.56
= $19,051
Product b = (420 ×6) × ($28 × 58%)
= 2520 × $16.24
= $40,925
Total desired inventory = $19,051 + $40,925
= $ 59,976
Purchase= cost of good sold + ending merchandise inventory -
beginning merchandise inventory
Product a = $22,226 + $19,051-0
=$41,277
Product b = $47,746 + $40,925-0
= $ 88,671
Total budgeted purchase = $41,277 + $88,671
Total budgeted purchase = $1,29,948
ekkarill92 answered 1 year agoRelated Solutions
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