Response to the following problem:
Brooklyn Furniture, a retail store, has an average gross profit ratio of 42%. The sales forecast for the next four months follows:
May. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100,000
June . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,000
July . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124,000
August . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160,000
Management's inventory policy is to have ending inventory equal to 80% of the cost of sales for the subsequent month, although it is estimated that the cost of inventory at April 30 will be $45,000.
Required:
Calculate the purchases budget, in dollars, for the months of May and June.