Question: Leimersheim GmbH has adopted the following policies regarding merchandise purchases

Leimersheim GmbH has adopted the following policies regarding merchandise purchases and inventory. At the end of any month, the inventory should be €15,000 plus 90% of the cost of goods to be sold during the following month. The cost of merchandise sold averages 60% of sales. Purchase terms are generally net, 30 days. A given month’s purchases are paid as follows: 20% during that month and 80% during the following month.
Purchases in May had been €150,000 and the inventory on May 31 was higher than planned at €230,000. The manager was upset because the inventory was too high. Sales are expected to be June, €300,000; July, €290,000; August, €340,000; and September, €400,000.
1. Compute the amount by which the inventory on May 31 exceeded the company’s policies.
2. Prepare budget schedules for June, July, and August for purchases and for disbursements for purchases.


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  • CreatedNovember 19, 2014
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