Chu Company provided the following information related to its inventory sales and purchases for December Year 1 and the first quarter of Year 2: Dec. Year 1 Jan. Year 2 Feb. Year 2 Mar. Year 2 (Actual) (Budgeted) (Budgeted) (Budgeted)Cost of goods sold$30,000 $60,000 $80,000 $50,000 Desired ending inventory levels are 34% of the following month's projected cost of goods sold. Budgeted purchases of inventory in February Year 2 would be:

Budgeted purchases of inventory in February Year 2 would be $69,800

Explanation:

CGS _Ending Inventory_Beginning Inventory _ Purchases

Dec. Year 1 _$30,000 _ $20,400 $0 $0

Jan. Year 2 _$60,000 _$27,200 $20,400$66,800

Feb. Year 2 _$80,000_ $17,000 $27,200$69,800

Use following formula to calculate the Purchases

Cost of Goods sold = Beginning Inventory + Purchases - Ending Inventory

Purchases = Cost of Goods sold - Beginning Inventory + Ending Inventory

Placing value of Jan Year 2

Purchases = $60,000 - $20,400 + $27,200 = $66,800

Placing value of Feb Year 2

Purchases = $80,000 - $27,200 + $17,000 = $69,800