The Willsey Merchandise Company has budgeted $40,000 in sales for the month o? December. The company's cost of goods sold is 30% of sales. If the company has budgeted to purchase $18,000 in merchandise during December, then the budgeted change in inventory levels over the month of December is:

A) $6,000 increase.
B) $22,000 increase.
C) $10,000 decrease.
D) $15,000 decrease.

Question

Muhammed Bamne · Accepted Answer

Final Answer : A, Explanation :  The cost of goods sold (COGS) is 30% of sales, so COGS = 0.30 * $40,000 = $12,000. If the company plans to purchase $18,000 in merchandise, the difference between what is purchased and the COGS is $18,000 - $12,000 = $6,000. This means inventory will increase by $6,000.

Definitions

Learning Objectives

Learning Objectives

Related questions