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Neo, Tutor
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Experience:  BS Accounting
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Having a little trouble with Problem 7-21a in Fundamentals

Customer Question

Having a little trouble with Problem 7-21a in Fundamentals in Managerial Accounting 6th edition

part C. tell you to put an inventory purchase budget forthe next year.

This is what I came up with and it is telling me that I am incorrect...please help

States COGS is 60% of sales
Companys policy is to keep 10% of next periods estimated cost of goods sold for the current periods ending inventory
(Hint: use the cost of goods sold for the first quarter to determine the beginning inventory for the first quarter)
Estimated ending inventory for next year is 34000

Sales: $231,000 $252,000 $315,000 $252,000
COGS: 138,600 151,200 189,000 151,200
+ des. End Inv: 15,120 18,900 15,120 34,000
Inven. Needed 153,720 170,100 204,120 185,200
- begin invent 13,860 15,120 18,900 15,120
Reqired Purch $139,860 $154,980 $185,220 $170,080

some check figures it gives me are 1st quarter for required peaches is 141120.

I cant see where I went wrong
Submitted: 4 years ago.
Category: Homework
Expert:  Neo replied 4 years ago.
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Customer: replied 4 years ago.



The book stated to find desired inventory:


that the companys policy is to keep 10% of the next periods estimated cose of goods sold as the current peroids ending inventory. Why is that we used the 20% to get this answer then.

Expert:  Neo replied 4 years ago.

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Customer: replied 4 years ago.
thanks. that would explain it
Expert:  Neo replied 4 years ago.

You are most welcome and thank you, too. :)