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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Budget p
Credit sales for March 2004 was $21000
Gross Profit margin is expected to be 25%
The gross profitmargin is expected to be 25%. Due to an anticipated continued increase in sales, MrGrob intends to increase inventory levels in March 20X4 by $2,000, and it is intended that the payables balance is increased by $3,000 to ease cashflow in the same month
Calculate the budgeted payment to suppliers in March 2004
Sir for this question I was wondering why the increase in inventory would increase the budgeted payment to suppliers in March 2004 because I thought that the increase in inventory would increase the closing inventory hence meaning that the cost of sales would be lower
If cost of sales are lower doesn’t that mean payment is also lower?
Increasing inventory means that they bought more and if they bought more then they will have to pay more. How much cash they end up paying is not the same as the cost of what was actually sold.