Gemstone, Ltd.
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Purchases budget - analytical:
Gemstone, Ltd. is a retail jeweller. Most of the firm's business is in jewellery and watches. The firm's average gross profit ratio for jewellery and watches is 80% and 40%, respectively. The sales forecast for the next two months for each product category is as follows;
Jewellery Watches
September $186,000 $90,000
October $144,000 $76,500
The company's policy, which is expected to be achieved at the end of August, is to have ending inventory equal to 120% of next month's cost of goods sold.
a. Calculate the cost of goods sold for jewellery and watches for September and October
b. Calculate a purchases budget, in dollars, for each product for the month of September
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Solution Summary
This solution illustrates how to compute cost of goods sold and construct a purchases budget.
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