Bramble Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow: Sales are budgeted at $210,000 for November, $190,000 for December, and $180,000 for January. Collections are expected to be 50% in the month of sale and 50% in the month following the sale. The cost of goods sold is 55% of sales. The company would like maintain ending merchandise inventories equal to 45% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase. Other monthly expenses to be paid in cash are $22,700. Monthly depreciation is $13,700. Ignore taxes. Balance Sheet October 31 Assets Cash $ 22,500 Accounts receivable 72,500 Merchandise inventory 51,975 Property, plant and equipment, net of $574,500 accumulated depreciation 1,096,500 Total assets $ 1,243,475 Liabilities and Stockholders' Equity Accounts payable $ 256,500 Common stock 822,500 Retained earnings 164,475 Total liabilities and stockholders' equity $ 1,243,475 The cost of December merchandise purchases would be:

Bramble Corporation

The cost of December merchandise purchases would be:

= $102,025.

Explanation:

a) Data and Calculations:

Cost of goods sold = 55% of sales

Ending Inventory = 45% of the next month's cost of goods sold.

                                 November    December   January

Budgeted sales        $210,000      $190,000   $180,000

Cost of goods sold   $115,500      $104,500     $99,000

Ending inventory       $47,025       $44,550

Cost of goods available                $149,050

Less Beginning inventory                 47,025

Purchases for December              $102,025

Cost of goods sold:

November = 55% of $210,000 = $115,500

December = 55% of $190,000 = $104,500

January = 55% of $180,000     =  $99,000

Ending Inventory:

October = $51,975

November = 45% of $104,500 = $47,025

December = 45% of $99,000 =  $44,550

Beginning Inventory:

November = $51,975

December = $47,025

January = $44,550

Check:

Beginning Inventory            $47,025

Purchases for December    102,025

Goods available for sale   $149,050

Less Ending Inventory          44,550

Cost of goods sold           $104,500