Question:
Purchases budget-analytical Gemstone, 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 80% and 40%, respectively. The sales forecast for the next two months for each product category is as follows:
|
Jewelry
|
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 the next month's cost of goods sold.
Required:
a. Calculate the cost of goods sold for jewelry and watches for September and October.
b. Calculate a purchases budget, in dollars, for each product for the month of September.