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cash budgets

Kkhan15y ago
the business plans to maintain inventories at their existing level until sometime in March, when they are to be reduced by £5000. inventories will remain at this lower level indefinitely. Inventories are purchased using one month's credit. December purchases totalled £30,000.

Jan Feb Mar Apr May Jun
sales revenue 52000 55000 55000 60000 55000 53000
cost of goods sold 30000 31000 31000 35000 31000 32000

please can u help me with the payables cash budget......i find the above statement about inventories a little vague...can u explain?

i'll be really thankful..
regards.
John MoffatJohn MoffatTutor15y ago#1
While inventories remain at the same level, the purchases each month will be the same figure as the cost of goods sold (and the payment will be one month later).
However in March, since inventories are being reduced by 5000, the purchases will be 5000 less than the cost of good sold (again,payment for them being one month later)
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