Marty's Merchandise has budgeted sales as follows for the second quarter of the year:

Marty's Merchandise has budgeted sales as follows for the second quarter of the year:

April	$	30,000
May	$	60,000
June	$	50,000

Cost of goods sold is equal to 70% of sales. The company wants to maintain a monthly ending inventory equal to 120% of the cost of goods sold for the following month. The inventory on March 31 was below this target and was only $22,000. The company is now preparing a Merchandise Purchases Budget for April, May, and June.

The budgeted purchases for May are:

Multiple Choice

• $33,600

  Correct
• $49,400
• $50,400
• $60,000

Explanation

Merchandise Purchases Budget

		May
Budgeted cost of goods sold (70% × $60,000)	$	42,000
Add desired ending merchandise inventory (120% × 70% × $50,000)		42,000
Total needs		84,000
Less beginning merchandise inventory (120% × 70% × $60,000)		50,400
Required purchases	$	33,600