Soft Shell Purchases Motorcycle Helmets Which It Custom Paints and Sells

question 211

Essay

Soft Shell purchases motorcycle helmets which it custom paints and sells to motorcycle dealers and repair shops worldwide. Sales are expected to be $3,000,000 in June, $4,000,000 in July $4,500,000 in August and $2,500,000 in September. Soft Shell sets it prices to average 40% gross profit on sales revenue. The company wants to keep a minimum inventory of $500,000 plus 15% of the next month's cost of goods sold.
Required:
Prepare an inventory, purchases, and cost of goods sold budget for the months of July, and August.

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Definitions:

Operating Assets

Assets that are used in the day-to-day operations of a business to generate income, including both current and long-term assets.

Net Operating Income

A financial metric that calculates a company's profitability by subtracting operating expenses from its total revenue, excluding taxes and interest.

Residual Income

The amount of income that an individual has after all personal debts and expenses have been paid.

Hum Division

A fictitious or specific name for a division within a company, which may focus on a particular area of business or product line.