Asked by Alissa Prete on May 29, 2024
Verified
The formula for determining budgeted merchandise purchases is budgeted
A) production + desired ending inventory - beginning inventory.
B) sales + beginning inventory - desired ending inventory.
C) cost of goods sold + desired ending inventory - beginning inventory.
D) cost of goods sold + beginning inventory - desired ending inventory.
Merchandise Purchases
The total cost incurred by a merchandising company to buy goods for resale during a period.
Beginning Inventory
The inventory on hand at the start of an accounting period, before any purchases or production have been added.
Desired Ending Inventory
The inventory level that a company aims to have at the end of a period to meet forecasted sales and to provide a buffer for uncertainties.
- Understand the formula and process for budgeting merchandise purchases.
Verified Answer
TD
THE DR EXPERIENCE PODCASTMay 30, 2024
Final Answer :
C
Explanation :
The formula for determining budgeted merchandise purchases is cost of goods sold + desired ending inventory - beginning inventory. This is because the cost of goods sold represents the cost of the merchandise that was sold during the budget period, and to determine the amount of additional merchandise that needs to be purchased, you need to add the desired ending inventory (the amount of inventory you want to have on hand at the end of the budget period) and subtract the beginning inventory (the amount of inventory you had on hand at the beginning of the budget period). Therefore, the formula is C.
Learning Objectives
- Understand the formula and process for budgeting merchandise purchases.