(Answered) Question - preparing an operating budgettremont inc sells

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Question - Preparing an operating budget

Tremont, Inc. sells tire rims. Its sales budget for the nine months ended September 30, 2014, follows:

Quarter Ended Nine-Month Total

March 31 June 30 September 30

Cash sales, 20% $ 24,000 $ 34,000 $ 29,000 $ 87,000

Credit sales, 80% 96,000 136,000 116,000 348,000

Total sales $ 120,000 $ 170,000 $ 145,000 $ 435,000

In the past, cost of goods sold has been 40% of total sales. The director of marketing and the financial vice president agree that each quarter's ending inventory should not be below $20,000 plus 10% of cost of goods sold for the following quarter. The marketing director expects sales of $220,000 during the fourth quarter.

The January 1 inventory was $32,000. Prepare an inventory, purchases, and cost of goods sold budget for each of the first three quarters of the year. Compute cost of goods sold for the entire nine-month period.

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