Purchases budget—analytical Precious Stones, Ltd., is a retail jeweler. Most of the firm’s business is in jewelry and watches. The firm’s average gross profit ratio for jewelry and watches is 60% and 37.5%, respectively. The sales forecast for the next two months for each product category is as follows:Jewelry WatchesMay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $124,000 $60,000June . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,000 51,000The company’s policy, which is expected to be achieved at the end of April, is to have ending inventory equal to 200% of the next month’s cost of goods sold.Required:a. Calculate the cost of goods sold for jewelry and watches for May and June.b. Calculate a purchases budget, in dollars, for each product for the month of May.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Purchases budget—analytical Precious Stones, Ltd., is a retail jeweler. Most of the firm’s business is in jewelry and watches. The firm’s average gross profit ratio for jewelry and watches is 60% and 37.5%, respectively. The sales
Jewelry Watches
May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $124,000 $60,000
June . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,000 51,000
The company’s policy, which is expected to be achieved at the end of April, is to have ending inventory equal to 200% of the next month’s cost of goods sold.
Required:
a. Calculate the cost of goods sold for jewelry and watches for May and June.
b. Calculate a purchases budget, in dollars, for each product for the month of May.
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