# CMA Study Group

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## Master budget-section B_cma part 1

• #### 1.  Master budget-section B_cma part 1

Posted 11-24-2021 01:53 PM
Hello everyone ,,,
I would like an explanation of the answer to this question !
Why the ending inventory percentage taken from cost of good sold while the question text ( ‏maintaining inventory at 15 % of the next month's forecast sales)!!!

• #### 2.  RE: Master budget-section B_cma part 1

Posted 11-24-2021 10:36 PM
hello noura ,

the equation :   COGS = purchases + beginning inv. - ending inv.

the excel sheet explain for you ,

if you don't understanding , you can tell me 966538373304

------------------------------
Ali Abdalla
Accountant
CAIRO
Egypt
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• #### 3.  RE: Master budget-section B_cma part 1

Posted 11-25-2021 07:15 AM
Hi Noura,

Im also confused at first but I think since the problem provided the cost of merchandise, we should take note that under Cost of Good Sold the beginning inventory and ending inventory or the items under COGS should be presented only at cost that is why the problem computed it at cost. Hope this will help.

• #### 4.  RE: Master budget-section B_cma part 1

Posted 11-25-2021 01:43 AM

Hello Noura,

Your concept is not ok.

Remember that
inventory beginning balance + purchases = COGS + inventory ending balance

1. Inventory beginning balance = the cost of 15% of July`s sales

= 15% * (60%*600,000)

= 54,000 \$

1. Inventory ending balance       = the cost of 15% of August`s sales

= 15% * (60%*650,000)

= 58,500 \$

1. Cost of Goods Sold   = 60% of July`s sales

= 60% * (600,000)

= 360,000 \$

1. Required Purchases   = 360,000 + 58,500 - 54,000

= 364,500 \$

I HOPE YOU GET IT AS WELL.

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