Ace the CMA 2026 Challenge – Unlock Your Accounting Superpowers!

To calculate purchases, the formula used is derived from the relationship between sales, inventory, and the cost of goods sold (COGS). The correct approach involves considering the beginning inventory, purchases made during the period, and ending inventory to determine the COGS.

The formula can be expressed as follows:

Purchases = COGS + Ending Inventory - Beginning Inventory

This means you can find the purchases for a given year by taking the COGS for that year, adding the ending inventory for the year, and subtracting the beginning inventory of that year. This allows you to capture how much was actually purchased during the year after accounting for the inventory levels at the start and end of the period.

The reasoning for selecting this answer revolves around understanding inventory movements over the reporting period. By determining the flow of goods, one can accurately assess how much was purchased to replenish stock for sales, considering what was sold (COGS) and what remained (ending inventory).

Understanding this relationship is essential for effective inventory management and cost control, which are crucial components in the role of a management accountant.