Precious Stones Ltd. is a retail jeweler. Most of the firm’s business is in jewelry and watches. The firm’s average gross profit ratio for jewelry and watches is 70% and 40%, respectively. The sales forecast for the next two months for each product category is as follows:

The company’s policy, which is expected to be achieved at the end of April, is to have ending inventory equal to 150% of the next month’s cost of goods sold.

Required:
a. Calculate the cost of goods sold for jewelry and watches for May and June.
b. Calculate a purchases budget, in dollars, for each product for the month of May.

Transcribed Image Text:

May.. June .. Jewelry Watches $186,000 $90,000 144,000 76,500