A. This answer does not take into consideration the beginning inventory carried over from July's ending inventory.

B. This is simply 70% of the August sales figure. The correct way to calculate the cost of inventory is to divide the sales by 1 + .30 (the markup). Then beginning and ending inventory need to be taken into consideration. See correct answer for full calculation.

C. All calculations need to be done using cost figures, not sales figures. So sales figures will need to be converted into cost figures using this formula: Cost of inventory = Sales price / 1.3.

Beginning inventory (Aug. 1) needs to be 25% of the cost of August sales. August sales are expected to be $728,000. Therefore, the cost of those sales will be $728,000 / 1.3, or $560,000. And 25% of $560,000 is $140,000. So the beginning inventory will be $140,000.

Ending inventory (Aug. 31) needs to be 25% of the cost of September sales. September sales are expected to be $624,000. Therefore, the cost of those sales will be $624,000 / 1.3, or $480,000. And 25% of $480,000 is $120,000. So the ending inventory will be $120,000.

The inventory equation is:

Beginning Inventory + Purchases – Cost of Goods Sold = Ending Inventory

We have all of those amounts except the Purchases. Whenever we have three out of the four amounts, we can always solve for the fourth amount.

Let X represent the August Purchases amount:

$140,000 + X - $560,000 = $120,000

X = $540,000

D. This is the COGS for the month, but does not take into consideration beginning or ending inventory. See correct answer for calculations.