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Prepare a purchase budget for january and february

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Question - Super Feed Company sells pet food in 10-kilogram bags for $12.40 per bag. Sales estimates for the first three months of the year are as follows:

Month Bags

January 18 000

February 20 000

March 22 000

December (previous year) sales were 16 000 bags of pet food. Super Feed's desired ending inventory of pet food each month is 25 percent of the next month's sales estimate (in bags). All sales are cash sales. Super Feed purchases bags of pet food at $9.40 per bag and pays for them the month after the purchase. General and administrative expenses total $18 000 per month (including $10 000 depreciation), and Super Feed pays for these expenses (except for depreciation) in the same month they are incurred. January's current liabilities (all to be paid in January) total $ 35 500. The business' cash balance on 1 January is $ 38 000.

(a) Prepare a purchase budget for January and February.

Reference no: EM132234592

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