Question

Montel Company’s July sales budget calls for sales of \(600,000. The store expects to begin July with \)50,000 of inventory and to end the month with $40,000 of inventory. Gross margin is typically 40% of sales. Determine the budgeted cost of merchandise purchases for July.

Short answer

The amount of budgeted cost of merchandise purchases for the month of July is $350,000.

Step-by-step solution

Given the following amounts

The budgeted sales for July are $600,000

Beginning inventory $50,000 and ending inventory $40,000

Gross margin is at 40% of the budgeted sales

Computation of budgeted cost of merchandise purchases for July

Montel Company
Computation of budgeted cost of merchandise
For the month of July
Particulars	Amount
Budgeted cost of goods sold $(\mathbf{\$}\mathbf{600}\mathbf{,}\mathbf{000}\mathbf{-}(\mathbf{\$}\mathbf{600}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{40}\mathbf{\%}))$	$360,000
Add: Budgeted ending inventory	$40,000
Required inventory	$400,000
Less: Beginning inventory	$50,000
Budgeted cost of merchandise	$350,000