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##### III. Computing budgeted cash payments for purchase...

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III. Computing budgeted cash payments for purchases Powerdyne Company?s cost of goods sold is consistently 60% of sales. The company plans to carry ending merchandise inventory for each month equal to 40% of the next month?s budgeted cost of goods sold. All merchandise is purchased on credit, and 50% of the purchases made during a month is paid for in that month. Another 35% is paid for during the first month after purchase, and the remaining 15% is paid for during the second month after purchase. Expected dollar amount of sales are: August (actual), 150,000 September (actual), 350,000 October (estimated), 200,000 November (estimated), 300,000. Use this information to determine October?s expected cash payments for purchases. (Hint: Use the layout as shown below, but revised for the facts given here.) Hockey Den Merchandise Purchases Budget October 2011 ? December 2011 October November December Next month?s budgeted sales (units) ?????. 800 1,400 900 Ratio of inventory to future sales??????... x 90% x 90% x 90% Budgeted ending inventory (units)??????. 720 1,260 810 Add budgeted sales (units) ????????? 1,000 800 1,400 Required units of available merchandise???... 1,720 2,060 2,210 Deduct beginning inventory (units)?????... 900 720 1,260 Units to be purchased??????????? 820 1,340 950 Budgeted cost per unit??????????.. \$ 60 \$ 60 \$ 60 Budgeted cost of merchandise purchases???. \$49,200 \$80,400 \$57,000

Paper#7901 | Written in 18-Jul-2015

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