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21 September, 17:45

Zeller Company estimates that 2017 sales will be $40,000 in quarter 1, $48,000 in quarter 2, and $58,000 in quarter 3. Cost of goods sold is 50% of sales. Management desires to have ending finished goods inventory equal to 10% of the next quarter's expected cost of goods sold. Prepare a merchandise purchases budget by quarter for the first 6 months of 2017.

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  1. 21 September, 17:58
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    Answer and Explanation:

    As per the data given in the question,

    Quarter

    1 2 6 month

    Budgeted cost of goods sold (40,000*0.50) (48,000*0.50) $44,000

    $20,000 $24,000

    Add: Desired ending inventory (24,000*0.10) (58,000*0.10) $8,200

    $2,400 $5,800

    Total required units $20,000+$2,400 $24,000+$5,800 $52,200

    $22,400 $29,800

    Less: Begin. merchandise inv. $20,000*0.10 $24,000*0.10 $4,400

    $2,000 $2,400

    Budgeted purchase $20,400 $27,000 $47,800
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