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

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

Answer:-

a. Inventory Purchases Budget:-

	January	February	March
Budgeted Cost of Goods Sold	53,000	57,000	63,000
Plus: Desired Ending Inventory	5,700	6300 [63000*10/100]	7,900 [79000*10/100]
Inventory needed	58,700	63,300	70,900
Less: Beginning Inventory	5,300	5,700	6,300
Required Purchases (On Account)	53,400	57,600	64,600

b. Cost of Goods Sold in first quarter proforma income statement = 53000+57000+63000 = $ 173,000

c. Ending Inventory to be reported in proforma balance sheet at the end of first quarter = $ 7,900

Cost of Goods Sold	$ 173,000
Ending Inventory	$ 7,900

ekkarill92 answered 2 years ago

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