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

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Definitions:

Simple Regression

A statistical method for modeling the relationship between a single independent variable and a dependent variable.

Dependent Variable

The variable in a study or model that is affected by changes in other variables (independent variables), often representing the outcome or effect being investigated.

Independent Variable

An element or factor in an experiment that is manipulated or changed to observe its effects on the dependent variable.

Quantitative Forecasting

A method of predicting future events or trends based on numerical data and statistical techniques.