Chapter 9, Problem 9.36AE

Cost of goods sold, inventory, and purchases budget (Learning Objective 4)

Ace Electronics sells tablets. Its sales budget for the nine months ended September 30 follows:

In the past, cost of goods sold has been 70% of total sales. The director of marketing and the financial vice president agree that each quarter’s ending inventory should not be below $20,000 plus 15% of cost of goods sold for the following quarter. The marketing director expects sales of $225,000 during the fourth quarter. The January 1 inventory was $33,125.

Requirement

Prepare a cost of goods sold, inventory, and purchases budget for each of the first three quarters of the year. Compute cost of goods sold for the entire nine-month period.