Chapter 22, Problem 14SE

Preparing an operating budget—inventory, purchases, and cost of goods sold budget

Brooks Company expects to sell 8,500 units for $175 each for a total of $1,487,500 in January and 2,500 units for $200 each for a total of $500,000 in February. The company expects cost of goods sold to average 70% of sales revenue, and the company expects to sell 4,700 units in March for $280 each. Brooks’s target ending inventory is $20,000 plus 50% of the next month’s cost of goods sold. Prepare Brooks’s inventory, purchases, and cost of goods sold budget for January and February.