Hi-Value Products Company Is Creating an Operating Budget for the 3^rd

question 131

Essay

Hi-value Products Company is creating an operating budget for the 3^rd quarter. Budgeted sales are $100,000 in July, $120,000 in August, $160,000 in September, and $200,000 in October. Cost of goods sold is 60% of sales. The desired ending inventory is 50% of the Cost of goods sold for the following month, plus a "safety cushion" of $2,000.
The inventory balance at the end of June was $50,000. Using the format below, please prepare a budget for Inventory, Purchases and Cost of goods sold.
$$\begin{array} { | l | l | l | l | } \hline \text { Inventory, Purchases and C.O.G.S. Budget } & \text { Jul } & \text { Aug } & \text { Sep } \\\hline \text { Cost of goods sold (a) } & & & \\\hline \text { Desired ending inventory(b) } & & & \\\hline \text { Total inventory required } & & & \\\hline \text { less Beginning inventory } & & & \\\hline \text { Purchases } & & & \\\hline\end{array}$$
(a) COGS = 60% of sales
(b) $2,000 + 50% of COGS for next month