Question

Midland Company buys tiles and prints different designs on them for souvenir and gift stores. It buys the tiles from a small company in Europe, so at all times it keeps on hand a stock equal to the tiles needed for three months’ sales. The tiles cost $1.00 each and must be paid for in cash. The company has 27,000 tiles in stock. Sales estimates, based on contracts received, are as follows for the next six months:

January		12,000
February		18,300
March		14,200
April		15,100
May		9,600
June		7,000

Required:

a. & b. Estimate purchases (in units) and cash required to make purchases in January, February, and March.

MIDLAND COMPANY Merchandise Purchases Budget For the Period Ended March 31 (in units) January February Units to be purchased March Estimated cost

Answer 1

Miland Company Merchandise Purchases Budget For the Period Ended March 31 | January February Estimated sales 12,000 18,300 Add: Estimated ending inventory 47,600 38,900 Total merchadise needs 59,600 57,200 Less: Beginning inventory 27,000 47,600 Merchandise to be purchased 32,600 9,600 Estimated cost per unit $ 1.00 $ 1.00 $ Total estimated cost of merchandise $ 32,600 $ 9,600 $ March 14,200 31,700 45,900 38,900 7,000 1.00 7,000 January: Estimated ending inventory = 18,300 + 14,200 + 15,100 Estimated ending inventory = 47,600 February: Estimated ending inventory = 14,200 + 15,100 + 9,600 Estimated ending inventory = 38,900 March: Estimated ending inventory = 15,100 + 9,600 + 7,000 Estimated ending inventory = 31,700