Campbell Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget.

Campbell Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget. Campbell's policy is to maintain an ending inventory balance equal to 10 percent of the following month's cost of goods sold. April's budgeted cost of goods sold is $79,000.

Required

a. Complete the inventory purchases budget by filling in the missing amounts.

b. Determine the amount of cost of goods sold the company will report on its first quarter pro forma income statement.

c. Determine the amount of ending inventory the company will report on its pro forma balance sheet at the end of the first quarter.

Expert Solution

Solution:

a.	Inventory Purchase Budget
		January	February	March
	Budgeted Cost of goods sold	$57,000	$61,000	$67,000
	Plus: Desired Ending inventory	$6,100	$6,700	$7,900
		($61,000*10%)	($67,000*10%)	($79,000*10%)
	Inventory Needed	$63,100	$67,700	$74,900
	Less: Beginning inventory	$5,700	$6,100	$6,700
	Required Purchases (on account)	$57,400	$61,600	$68,200

b.	Cost of goods sold = $57,000+$61,000+$67,000 = $185,000

c.	Ending inventory = $7,900

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ekkarill92 answered 2 years ago

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