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16 October, 01:54

Durango Co. desires to maintain an ending inventory equal to 10% of next month's cost of budgeted sales. Assume that Durango Co. maintained this level of ending inventory for the month of September. The cost of budgeted sales for October is $100,000 and the cost of budgeted sales for November is $200,000. Calculate required purchases for the month of October.

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  1. 16 October, 02:06
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    Required purchase for October = $110,000

    Explanation:

    Given:

    Ending inventory = 10% of next month's budgeted sales

    Budgeted sales for October = $100,000

    Budgeted sales for November = $200,000

    Purchase for the month of October = ?

    Calculation of Required purchase for the month of October:

    Particular Amount

    Budgeted sales of October $100,000

    Add: Desired ending inventory ($200,000 x 10%) $20,000

    Total Inventory needed $120,000

    Less: Beginning inventory ($100,000 x 10%) $10,000

    Required purchase for October $110,000
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