Question: Hardy Company s cost of goods sold is consistently 60 of
Hardy Company’s cost of goods sold is consistently 60% of sales. The company plans to carry ending merchandise inventory for each month equal to 20% of the next month’s budgeted cost of good sold. All merchandise is purchased on credit, and 50% of the purchases made during a month is paid for in that month. Another 35% is paid for during the first month after purchase, and the remaining 15% is paid for during the second month after purchase. Expected sales are: August (actual), $ 325,000; September (actual), $ 320,000; October (estimated), $ 250,000; November (estimated), $ 310,000. Use this information to determine October’s expected cash payments for purchases.
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