Caplico Company Has Prepared the Following Sales Budget Cost of Goods Sold Is Budgeted at 60% of Sales

question 26

Multiple Choice

Caplico Company has prepared the following sales budget: $$\begin{array} { | r | r | } \hline \text { Month } & \text { Budgeted Sales } \\\hline \text { March } & \$ 200,000 \\\hline \text { April } & 180,000 \\\hline \text { May } & 220,000 \\\hline \text { Tune } & 260,000 \\\hline\end{array}$$ Cost of goods sold is budgeted at 60% of sales and the inventory at the end of February was $36,000. Desired inventory levels at the end of each month are 20% of the next month's cost of goods sold. What is the desired beginning inventory on June 1?

• A) $52,000
• B) $26,400
• C) $43,200
• D) $31,200

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Definitions:

Production Possibilities Frontier

A curve depicting all maximum output possibilities for two or more goods given a set of inputs (resources, labor, etc.).

Inefficient

A situation where resources are not utilized in the best possible way, leading to wasted inputs or the capability to produce more for less not being exploited.

Comparative Advantage

Situation in which Country 1 has an advantage over Country 2 in producing a good because the cost of producing the good in 1, relative to the cost of producing other goods in 1, is lower than the cost of producing the good in 2, relative to the cost of producing other goods in 2.

Marginal Costs

The additional cost incurred by producing one more unit of a product or service.